Question

In: Statistics and Probability

Consumer Research, Inc., is an independent agency that conducts research on consumer attitudes and behaviors for...

Consumer Research, Inc., is an independent agency that conducts research on consumer attitudes and behaviors for a variety of firms. In one study, a client asked for an investigation of consumer characteristics that can be used to predict the amount charged by credit card users. Data were collected on annual income, household size, and annual credit card charges for a sample of 50 consumers and is shown below:

Income
($1000s)

Household
Size

Amount
Charged ($)

54

3

4,016

30

2

3,159

32

4

5,100

50

5

4,742

31

2

1,864

55

2

4,070

37

1

2,731

40

2

3,348

66

4

4,764

51

3

4,110

25

3

4,208

48

4

4,219

27

1

2,477

33

2

2,514

65

3

4,214

63

4

4,965

42

6

4,412

21

2

2,448

44

1

2,995

37

5

4,171

62

6

5,678

21

3

3,623

55

7

5,301

42

2

3,020

41

7

4,828

54

6

5,573

30

1

2,583

48

2

3,866

34

5

3,586

67

4

5,037

50

2

3,605

67

5

5,345

55

6

5,370

52

2

3,890

62

3

4,705

64

2

4,157

22

3

3,579

29

4

3,890

39

2

2,972

35

1

3,121

39

4

4,183

54

3

3,730

23

6

4,127

27

2

2,921

26

7

4,603

61

2

4,273

30

2

3,067

22

4

3,074

46

5

4,820

66

4

5,149

  1. Develop two simple regression equations
    1. Use annual income as the independent variable and annual credit card charges as the dependent variable
    2. Use household size as the independent variable and annual credit card charges as the dependent variable
    • Which variable is the better predictor of annual credit card charges?
    • Discuss your findings.
  1. Develop an estimated regression equation for annual credit card charges with annual income and household size as the independent variables.
    • Discuss your findings.
    • What is the predicted annual credit card charge for a three-person household withan annual income of $40,000?
  2. Would the inclusion of additional independent variables improve the model? Why? If so, what additional variables would you include?

Solutions

Expert Solution

you can see the summary and parameter values of model in the first image of excel where first summary output is for model one where income was independent then second one where number of households was independent then the combined model.

Please upvote If I am able to help you.

Thank you


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