A sociologist is studying the relationship between consumption expenditures of families in the United States (Consumption in
Question:
A sociologist is studying the relationship between consumption expenditures of families in the United States (Consumption in $), family income (Income in $), and whether or not the family lives in an urban or rural community (Urban = 1 if urban, 0 otherwise). She collects data on 50 families, a portion of which is shown in the accompanyingtable.
a. Estimate Consumption = ?0 + ?1?Income + ?2 Urban + ?. 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 Consumption = ?0 + ?1 Income + ?2 Rural + ? where the dummy variable Rural equals 1 if rural, 0 otherwise. 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 two models.
Transcribed Image Text:
Consumption Income Urban 62336 87534 60076 94796 59055 100908
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