Question

2. A consulting group surveyed Deloitte employees to research the factors that affect their satisfaction with their quality of life. Satisfaction is an index; the higher the score, the more satisfied with life a person is. Five factors were studied Age at first marriage, measured in years; Age Annual income, measured in thousands of dollars; Income Number of children; Children - -Health status, measured as an index; Health Number of social activities; Social The regression output is: Predicted Satisfaction 16.24+0.017 Age +2.8 Income +42 Children +0.19 Health 26.8 Social MS 742.00 57.55 Regression Residual Total 3710.00 2647.38 6357.38 12.89 46 51 a. Interpret the coefficient on Income and Social b. According to the model, which variable yields the greatest satisfaction in life? Explain. Determine the coefficient of determination, R 2, and interpret it. c. d. What are some possible omitted variables?
Please answer all parts and show all work.

Answer 1

A). If we increase income by 1 unit (1 $) then predicted satisfaction would be increased by 2.8 unit. If we increase number of social activities by 1 unit then predicted satisfaction would be increased by 26.8 units

B). According to the model, Children variables yields the greatest satisfaction in life. Because if number of children increases by 1 then predicted satisfaction would be increased by 42 units

C). =
SSReg SST
=
3710 0.58357 6357.38

That means those 5 independent variables can explain 58.36% of the total variability.

D). Some possible omitted variables: Age & Health; because coefficient values are low. That means increase/decrease of one unit would make a small change in predicted satisfaction.

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