Question

A sociologist is studying the relationship between consumption expenditures y of families in the United States, family income x, and whether or not the family lives in an urban or rural community. She collects data on 50 families, a portion of which is shown in the accompanying table. The entire data set, labeled Urban_Rural, can be found on the text website.


a. Estimate y = β0 + β1x + β2d +  where the dummy variable d equals 1 for urban families. Use the estimated model to predict the consumption expenditure of urban families with an income of $80,000. What is the corresponding consumption expenditure of rural families?
b. Estimate y = β0 + β1x + β2d +  where the dummy variable d equals 1 for rural families. Use the estimated model to predict the consumption expenditure of urban families with an income of $80,000. What is the corresponding consumption expenditure of rural families?
c. Interpret the results of the above twomodels.


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  • CreatedJanuary 28, 2015
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