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Case Problem: Consumer Research, Inc.

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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.

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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 independept variables. Discuss your findings.
4 - What is the predicted annual credit card charge for a three-person household with an annual income of $40000?
5 - Discuss the need for other independent variables that could be added to the model. What additional variables might be helpful?

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Solution Summary

Consumer Research, Inc is examined. The methods of descriptive statistics to summarize the data are provided.

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1.) Descriptive stats (mean, median, mode, standard deviation, etc.) have been generated for each category as shown in the excel file (this can easily be generated using the data analysis application on Excel: go to the "Data" tab and click on it, to the far right, upper corner you will see "Data Analysis". Click on this, highlight "Descriptive Statistics", then select the column of data you wish to generate descriptive statistics on). The average income is around $4300, with an average household size of about 3, and average charged at around $3964. It seems as though there is the most variation for the descriptive stats on the amount that is charged (with a standard deviation of ...

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