Abby Ross, a market specialist at the market research firm of Saez, Gann, and Spitz, is analyzing household budget data collected by her firm.Abby's dependent variable is monthly household expenditures on groceries (in $'s), and her independent variables are annual household income (in $1,000's)and household neighbourhood (0 = suburban, 1 = rural).Regression analysis of the data yielded the following table: For a rural household with $70,000 annual income, Abby's model predicts monthly grocery expenditure of ___.
A)$141.15
B)$190.28
C)$164.52
D)$122.67
E)$132.28

Question

Abby Ross, a market specialist at the market research firm of Saez, Gann, and Spitz, is analyzing household budget data collected by her firm.Abby's dependent variable is monthly household expenditures on groceries (in $'s), and her independent variables are annual household income (in $1,000's)and household neighbourhood (0 = suburban, 1 = rural).Regression analysis of the data yielded the following table:  For a rural household with $70,000 annual income, Abby's model predicts monthly grocery expenditure of ___.
A)$141.15 
B)$190.28 
C)$164.52 
D)$122.67 
E)$132.28

Quizplus · Accepted Answer

Using the regression equation provided in the table, we can calculate the predicted monthly grocery expenditure for a rural household with $70,000 annual income:
predicted monthly grocery expenditure = 61.43 + 0.982($70,000/1,000) + 13.62(1)
predicted monthly grocery expenditure = 61.43 + 68.74 + 13.62
predicted monthly grocery expenditure = $143.79
Therefore, the answer is B) $190.28, which is the closest choice to the predicted value after rounding it to two decimal places.

Abby Ross, a Market Specialist at the Market Research Firm