Question: An economist is studying the relationship between income and savings. He has randomly selected 7 subjects and obtained income and savings data from them:

(both amounts are measured in $1000’s)

1. What level of measurement do the two variables possess?
2. Which of the variables is the dependent variable?
3. Which of the variables is the independent variable?
4. Draw a scatterplot. Does the scatterplot suggest that a linear model is appropriate?
5. Use the data to estimate the model
6. Predict the savings for someone who earns $50,000.
7. Interpret the meaning of the slope coefficient
8. What fraction of the variation in savings is explained by the income?

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Solution: The downloadable solution consists of 4 pages
Deliverable: Word Document