Chapter 15, Problem 1CP

Consumer Research, Inc., is an independent agency that conducts research on consumer attitudes and behaviors for a variety of firms. In one study, a client asked for an investigation of consumer characteristics that can be used to predict the amount charged by credit card users. Data were collected on annual income, household size, and annual credit card charges for a sample of 50 consumers. The following data are contained in the file named Consumer.

Income ($1000s)	Household Size	Amount Charged ($)	Income ($1000s)	Household Size	Amount Charged ($)
54	3	4016	54	6	5573
30	2	3159	30	1	2583
32	4	5100	48	2	3866
50	5	4742	34	5	3586
31	2	1864	67	4	5037
55	2	4070	50	2	3605
37	1	2731	67	5	5345
40	2	3348	55	6	5370
66	4	4764	52	2	3890
51	3	4110	62	3	4705
25	3	4208	64	2	4157
48	4	4219	22	3	3579
27	1	2477	29	4	3890
33	2	2514	39	2	2972
65	3	4214	35	1	3121
63	4	4965	39	4	4183
42	6	4412	54	3	3730
21	2	2448	23	6	4127
44	1	2995	27	2	2921
37	5	4171	26	7	4603
62	6	5678	61	2	4273
21	3	3623	30	2	3067
55	7	5301	22	4	3074
42	2	3020	46	5	4820
41	7	4828	66	4	5149

Managerial Report

1. 1. Use methods of descriptive statistics to summarize the data. Comment on the findings.
2. 2. Develop estimated regression equations, first using annual income as the independent variable and then using household size as the independent variable. Which variable is the better predictor of annual credit card charges? Discuss your findings.
3. 3. Develop an estimated regression equation with annual income and household size as the independent variables. Discuss your findings.
4. 4. What is the predicted annual credit card charge for a three-person household with an annual income of $40,000?
5. 5. Discuss the need for other independent variables that could be added to the model. What additional variables might be helpful?