Annual expediture on prepared dinner and annual income

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Reference no: EM131133414

Imagine that you have come across a magazine article reporting the following relationship between annual expediture on prepared dinner (PD) and annual income (INC):

PD=23.4+0.003 INC

The coefficient of INC variable is reported as significant.

a. Does this relationship seem plausible? Is it possible to have a coefficient that is samll in magnitude and yet significant?

b. From the information given, can you tell how good the estimated model is?

c. What are the expected expenditures on PDs of a family earning $30,000?

d. If a family earning of $40,000 spent $130 annually on PDs, what is the residual?

e. What is the meaning of a negative residual?

Reference no: EM131133414

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