In: Statistics and Probability
. Develop a simple linear regression model to predict a person’s income (INCOME) based upon their years of education (EDUC) using a 95% level of confidence.
a. Write the reqression equation.
b. Discuss the statistical significance of the model as a whole using the appropriate regression statistic at a 95% level of confidence.
c. Discuss the statistical significance of the coefficient for the independent variable using the appropriate regression statistic at a 95% level of confidence.
d. Interpret the coefficient for the independent variable.
e. What percentage of the observed variation in income is explained by the model?
f. Predict the value of a person’s income using this regression model with 16 years of education.
2. Develop a simple linear regression model to predict a person’s income (INCOME) based on their age (AGE) using a 95% level of confidence.
a. Write the reqression equation.
b. Discuss the statistical significance of the model as whole using the appropriate regression statistic at a 95% level of confidence.
c. Discuss the statistical significance of the coefficient for the independent variable using the appropriate regression statistic at a 95% level of confidence.
d. Interpret the coefficient for the independent variable.
What percentage of the observed variation in a person’s income is explained by the model?
e. Predict the value of a person’s income who is 45 years old, using this regression model.
3. Develop a simple linear regression model to predict a person’s income (INCOME) based upon the hours worked per week of the respondent (HRS1) using a 95% level of confidence.
a. Write the reqression equation.
b. Discuss the statistical significance of the model as a whole using the appropriate regression statistic at a 95% level of confidence.
c. Discuss the statistical significance of the coefficient for the independent variable using the appropriate regression statistic at a 95% level of confidence.
d. Interpret the coefficient for the independent variable.
e. What percentage of the observed variation in income is explained by the model?
f. Predict the value of a person’s income who works 50 hours a week, using this regression model.
4. Develop a simple linear regression model to predict a person’s income (INCOME) based upon the number of children (CHILDS) using a 95% level of confidence. Children are expensive, and may encourage a parent to earn more to support the family.
a. Write the reqression equation.
b. Discuss the statistical significance of the model as a whole using the appropriate regression statistic at a 95% level of confidence.
c. Discuss the statistical significance of the coefficient for the independent variable using the appropriate regression statistic at a 95% level of confidence.
d. Interpret the coefficient for the independent variable.
e. What percentage of the observed variation in income is explained by the model?
f. Predict the value of a person’s income with 3 children, using this regression model..
5. Compare the preceding four simple linear regression models to determine which model is the preferred model. Use the Significance F values, p-values for independent variable coefficients, R-squared or Adjusted R-squared values (as appropriate), and standard errors to explain your selection.
6. Calculate the predicted income of a 45 year old, with 18 years of education, 2 children, and works 40 hours per week using your preferred regression model from part 5.
INCOME |
AGE |
EARNRS |
EDUC |
CHILDS |
HRS1 |
||||||||||
500 |
27 |
3 |
12 |
0 |
56 |
Income = |
annual income |
||||||||
500 |
23 |
3 |
12 |
1 |
10 |
Age = |
years of age of respondent |
||||||||
500 |
78 |
0 |
16 |
2 |
0 |
Earnrs = |
number of family members earning income |
||||||||
500 |
64 |
0 |
17 |
0 |
0 |
Educ = |
years of education |
||||||||
500 |
54 |
1 |
14 |
3 |
0 |
Childs = number of children |
|||||||||
500 |
22 |
2 |
13 |
1 |
0 |
Hrs1 = |
number of hours per week of work |
1.
X =Number of years of Education
Y =Annual income
a.
Regression equation is: .
b.
The regression statistic is the slope of the regession line, b1 =0. So, the 95% confidence interval includes 0 because (0 - MoE, 0+MoE) includes 0. (where MoE =margin of error).
Thus, the model is not significant.
c.
The coefficient for the independent variable X is the slope of the regession line, b1 =0. So, the 95% confidence interval includes 0 because (0 - MoE, 0+MoE) includes 0. (where MoE =margin of error).
Thus, the coefficient for the independent variable is not significant.
d.
Interpretation:
If the years of Education(X) changes by 1 year, the annual income(Y) does not show any change since coefficient of X is b1 =0
e.
The percentage of the observed variation in income that is explained by the model cannot be determined because the coefficient of determination, R2 is undefined. (since, Correlation, r is undefined, so is R2).
f.
When X =16 years of Education, then the annual income is =500