Question

A social scientist would like to analyze the relationship between educational attainment (in years of higher education) and annual salary (in $1,000s). He collects data on 20 individuals. A portion of the data is as follows:

Salary	Education
38	2
68	1
80	3
47	5
64	3
83	4
110	10
58	0
23	4
26	5
102	7
42	6
68	6
69	5
158	5
60	0
82	3
56	6
127	6
37	0

a. Find the sample regression equation for the model: Salary = β₀ + β₁Education + ε. (Round answers to 2 decimal places.)

Salaryˆ=Salary^=    +   Education

b. Interpret the coefficient for Education.

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $5,090.

• As Education increases by 1 unit, an individual’s annual salary is predicted to decrease by $8,590.

• As Education increases by 1 unit, an individual’s annual salary is predicted to decrease by $5,090.

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $8,590.

c. What is the predicted salary for an individual who completed 9 years of higher education? (Round coefficient estimates to at least 4 decimal places and final answer to the nearest whole number.)

Salary? $

Answer 1

a)

Salary = 49.29 + 5.09 * Education

b)

• As Education increases by 1 unit, an individual’s annual salary is predicted to increase by $5,090.

c)

Salary = 49.29 + 5.09 * 9

Salary = 95100