Question

In a regression analysis used to explain Consumption, Income was used as a predictor variable. Part of the output is shown below: Coefficient=10.6 Standard Error=1.1188 t Statistic=8.93 p-Value=0.0030 Income. What can we conclude about Income as a predictor of Consumption? Income is not a useful predictor of Consumption. Income is a useful predictor of Consumption.

Answer 1

Here we have to test of regression coefficient.

The null hypothesis H0 : = 0  

Alternative hypothesis H1 : 0

Given P value = 0.0030  

So if p value < a ( level of significance ) we reject the null hypothesis , otherwise we fail to reject the null hypothesis.

For a = 0.05

P value = 0.0030 < 0.05

So we reject the null hypothesis,

conclude that income is useful predictor of consumption.