Consider the two regression models Model (1): Pizza = B + B, Income + BAge + BAAge - Income +u Model (2): Pizza = YI + y2 Income + yAge + u where Pizza - Individual's annual expenditure on pizza Income Individual's annual income Age - Individual's age in years Suppose all the coefficient estimates are positive in both models. By including the interactive term in Model (1), what additional feature can we examine about the relationship between Pizza and Income and Age beyond what we can examine in the simpler Model (2)? Whether the effect of Age on Pizza varies with Income. O If Income is higher, whether the predicted value of Pizza is higher, regardless of Age. O Whether Age and Income each have a positive influence on Pizza. O Whether Income tends to be larger as Age increases.
Consider the two regression models Model (1): Pizza = B + B, Income + BAge + BAAge - Income +u Model (2): Pizza = YI + y2 Income + yAge + u where Pizza - Individual's annual expenditure on pizza Income Individual's annual income Age - Individual's age in years Suppose all the coefficient estimates are positive in both models. By including the interactive term in Model (1), what additional feature can we examine about the relationship between Pizza and Income and Age beyond what we can examine in the simpler Model (2)? Whether the effect of Age on Pizza varies with Income. O If Income is higher, whether the predicted value of Pizza is higher, regardless of Age. O Whether Age and Income each have a positive influence on Pizza. O Whether Income tends to be larger as Age increases.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Consider the two regression models
Model (1):
Pizza = Bi + BIncome + BAge + BAAge - Income +u
Model (2): Pizza = Yi + y2Income + y3Age + u
where
Pizza - Individual's annual expenditure on pizza
Income = Individual's annual income
Age - Individual's age in years
Suppose all the coefficient estimates are positive in both models.
By including the interactive term in Model (1), what additional feature can we examine about the
relationship between Pizza and Income and Age beyond what we can examine in the simpler Model
(2)?
O Whether the effect of Age on Pizza varies with Income,
O If Income is higher, whether the predicted value of Pizza is higher, regardless of Age.
O Whether Age and Income each have a positive influence on Pizza.
O Whether Income tends to be larger as Age increases.
O None of the presented possible answers are correct.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc84b055e-144c-410a-b600-78f0e07aa308%2F9299c6d7-7c08-4d75-8715-172445579fc0%2Fhocoooq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the two regression models
Model (1):
Pizza = Bi + BIncome + BAge + BAAge - Income +u
Model (2): Pizza = Yi + y2Income + y3Age + u
where
Pizza - Individual's annual expenditure on pizza
Income = Individual's annual income
Age - Individual's age in years
Suppose all the coefficient estimates are positive in both models.
By including the interactive term in Model (1), what additional feature can we examine about the
relationship between Pizza and Income and Age beyond what we can examine in the simpler Model
(2)?
O Whether the effect of Age on Pizza varies with Income,
O If Income is higher, whether the predicted value of Pizza is higher, regardless of Age.
O Whether Age and Income each have a positive influence on Pizza.
O Whether Income tends to be larger as Age increases.
O None of the presented possible answers are correct.
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