Question

1. The following data set contains information on years of formal education and incomes in 2015.

Row    Education    Income in

        in Years      2015 Dollars

1          7         22587

2         10         28305

3         12         40196

4         13         49483

5         14         54483

6         16         78073

7         18         99540

8         19        155646

9         21        125310

a. Estimate the regression equation Income = a + b(Education).

b. What is the predicted increase in Income for a one-year increase in Education?

c. What do you predict Income to be for a person who has 17 years of education?

d. How much of the variation in Income is explained (or accounted for) by Education?

e. Why do you think Income (in the data set) for 21 years of Education is lower than income with 19 years of education?

f. Show the graph of the data with your regression line.

g. Use the F statistic to test the hypothesis that there is no relation between Income and Education at the 5% level of significance. Do you reject this hypothesis or not?

h. If you reject the hypothesis in the previous question, what is the probability that you are committing a Type I error (i.e., what is the probability of a false positive)?

Answer 1