An estimated linear regression of annual fuel expenditures y on annual income x is represented as the following equation: y= 2,200 + 0.05x. Jim was offered a new job that would increase his salary by $2,000. What would be his potential increase in fuel costs? Based on this information, is the assumption of increased fuel cost against annual salary meaningful?
A) The increase in fuel cost is $100.00 annually; linearity assumption is justified.
B) The increase in fuel cost is $100.00 annually; linearity assumption is not justified.
C) The increase in fuel cost is $50.00 annually; linearity assumption is justified.
D) The increase in fuel cost is $1000.00 annually; linearity assumption is not justified.

Question

Quizplus · Accepted Answer

The increase in fuel cost is calculated by multiplying the increase in salary ($2,000) by the coefficient of x (0.05), which equals $100.00. The justification of the linearity assumption depends on the context and cannot be determined solely from this information, but generally, assuming a direct linear relationship between salary and fuel costs may not always be justified due to various factors influencing fuel expenditures.

An Estimated Linear Regression of Annual Fuel Expenditures Y on Annual