Question
A sociologist is looking at the relationship between consumption expenditures of families in the United States (Consumption in $), family income (Income in $), and
A sociologist is looking at the relationship between consumption expenditures of families in the United States (Consumption in $), family income (Income in $), and whether or not the family lives in an urban or rural community (Urban = 1 if urban, 0 otherwise). She collects data on 50 families across the United States, a portion of which is shown in the accompanying table.
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Estimate: Consumption = 0 + 1Income + . Compute the predicted consumption expenditures of a family with income of $80,000.
Note: Round coefficient estimates to at least 4 decimal places and round final answer to the nearest whole number.
| predicted consumption expenditures |
Include a dummy variable, labeled Urban, with values 1 for urban and 0 otherwise, to predict consumption for a family with income of $80,000 in urban and rural communities.
Note: Round coefficient estimates to at least 4 decimal places and round final answer to the nearest whole number.
| predicted consumption | |
| urban community | |
| rural community |
Include a dummy variable Urban and an interaction variable (Income Urban) to predict consumption for a family with income of $80,000 in urban and rural communities.
Note: Round coefficient estimates to at least 4 decimal places and round final answer to the nearest whole number.
| predicted consumption | |
| urban community | |
| rural community |
Which of the preceding models is most suitable for the data?
| since it has the |
| Consumption | Income | Urban |
| 62315 | 87691 | 0 |
| 60292 | 94877 | 1 |
| 70279 | 106198 | 0 |
| 43162 | 60803 | 0 |
| 26064 | 51081 | 0 |
| 52456 | 89260 | 1 |
| 45794 | 62943 | 1 |
| 59211 | 72039 | 1 |
| 45998 | 64531 | 0 |
| 60220 | 98138 | 1 |
| 36703 | 69673 | 1 |
| 62721 | 88939 | 1 |
| 54191 | 87779 | 1 |
| 49043 | 68009 | 0 |
| 54841 | 91448 | 1 |
| 66433 | 112485 | 0 |
| 65178 | 86375 | 0 |
| 64769 | 99925 | 1 |
| 63929 | 105296 | 1 |
| 76162 | 95749 | 1 |
| 79831 | 103376 | 1 |
| 39358 | 52734 | 0 |
| 33748 | 63846 | 0 |
| 52290 | 74086 | 1 |
| 58764 | 75181 | 0 |
| 71797 | 94634 | 1 |
| 59008 | 97500 | 1 |
| 70065 | 81509 | 1 |
| 63240 | 84914 | 0 |
| 42720 | 102620 | 0 |
| 59099 | 85600 | 1 |
| 29474 | 48938 | 0 |
| 57915 | 71749 | 1 |
| 58405 | 53915 | 0 |
| 19680 | 40110 | 0 |
| 53839 | 76121 | 0 |
| 66243 | 97574 | 1 |
| 64481 | 134586 | 1 |
| 59689 | 85678 | 1 |
| 27908 | 55551 | 0 |
| 52161 | 78882 | 1 |
| 64499 | 87167 | 0 |
| 26108 | 66766 | 0 |
| 71624 | 114805 | 0 |
| 31959 | 62087 | 0 |
| 69134 | 123242 | 1 |
| 24022 | 54491 | 0 |
| 54212 | 102687 | 1 |
| 49069 | 90344 | 0 |
| 59260 | 100937 | 1 |
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Analysis For Financial Management
Authors: Robert Higgins
6th Edition
0071181172, 9780071181174
