The Owner of a Bakery Wants to Analyze the Relationship

question 108

Essay

The owner of a bakery wants to analyze the relationship between the expenditure of a customer and the customer's income. A sample of 5 customers is taken and the following information was obtained. The least squares estimated line is = 4.348 + 0.0826 X.
a.Obtain a measure of how well the estimated regression line fits the data.
b.You want to test to see if there is a significant relationship between expenditure and income at the 5% level of significance. Be sure to state the null and alternative hypotheses.
c.Construct a 95% confidence interval estimate for the average expenditure for all customers with an income of $20,000.
d.Construct a 95% confidence interval estimate for the expenditure of one customer whose income is $20,000.

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Definitions:

Inflation Rate

How fast prices for goods and services overall go up, causing the value of money to go down.

Real Price

The price of a good or service after adjusting for inflation, reflecting the true purchasing power.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Structural Steel Beams

Steel shapes used in construction that are designed to bear heavy loads and form the skeleton of buildings and bridges.