Question: The data file, poverty contains data taken from Gerald Keller, Statistics for Management and Economics, 8th edition, abbreviated edition, described on page 628. The two variables are annual household income ($’000) and amount spent on food for 1 week, for a random sample of households. Use STATA where possible in this question and base your answer on the data given. Attach your STATA output to your assignment. Suppose you are a social worker advising your local MP about poverty.

a. Generate a new variable for average weekly income in $, rather than annual income in $’000. [no marks]

b. Obtain a suitable graphical display to show the relationship between the 2 weekly variables. [1 mark]

c. Run the regression of weekly food expenditure on weekly income. [1 mark]

d. Predict weekly food expenditure for a family with annual income of $50,000.

[1 mark] e. Test the significance of the slope explaining your choice of alternative hypothesis. [2 marks]

f. Test whether the slope is significantly different from 0.1; what would it mean if the slope was 0.1? [3 marks]

g. Write down 3 comments on whether you think this was a good model or not.

[3 marks]

h. Summarize, in one paragraph, your findings and the relationship between the 2 variables. Include an Interpretation of the intercept and slope obtained in a) above.

[7 marks]

i. Suggest a possible next step in this analysis. [2 marks]