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Chapter 7: Linear Regression: Case Problem 2 Consumer Research, Inc. Book Title: Business Analytics Printed By: Jigar Jitendrak Patel ([email protected]) © 2021 Cengage Learning, Cengage Learning

Chapter Review

Case Problem 2 Consumer Research, Inc.

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 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

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Income ($1000s)

Household Size

Amount Charged ($)

Income ($1000s)

Household Size

Amount Charged ($)

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

Source: Consumer Research, Inc. (https://www.bbb.org/us/ny/rochester/profile/secret-shopper/consumer-

research-inc-0041-45625697)

Managerial Report

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1. Use methods of descriptive statistics to summarize the data. Comment on the findings.

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. Develop an estimated regression equation with annual income and household size as the independent variables. Discuss your findings.

4. What is the predicted annual credit card charge for a three-person household with an annual income of $40,000?

5. Discuss the need for other independent variables that could be added to the model. What additional variables might be helpful?

Chapter 7: Linear Regression: Case Problem 2 Consumer Research, Inc. Book Title: Business Analytics Printed By: Jigar Jitendrak Patel ([email protected]) © 2021 Cengage Learning, Cengage Learning

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