Question

A social scientist would like to analyze the relationship between educational attainment (in years of higher education) and annual salary (in $1,000s). He collects data on 20 individuals. A portion of the data is as follows:

Salary			Education
	40			3
	53			4
	⋮			⋮
	38			0

Salary	Education
40	3
53	4
80	6
42	2
70	5
50	4
110	8
38	0
42	3
55	4
85	6
40	2
70	5
60	4
140	8
40	0
75	5
65	4
125	8
38	0

a. Find the sample regression equation for the model: Salary = β₀ + β₁Education + ε. (Round answers to 2 decimal places.)

Salaryˆ=Salary^=    +   Education

b. Interpret the coefficient for Education.

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $8,590.

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $10,850.

• As Education increases by 1 unit, an individual’s annual salary is predicted to decrease by $8,590.

• As Education increases by 1 unit, an individual’s annual salary is predicted to decrease by $10,850.

c. What is the predicted salary for an individual who completed 7 years of higher education? (Round coefficient estimates to at least 4 decimal places and final answer to the nearest whole number.)

SalaryˆSalary^ = $

Answer 1