Question

Starbucks is interested in understanding whether a person’s income can predict how much money they spend per month on premium coffee. They ask 25 randomly selected individuals and record the respondent’s income (in thousand dollars) and their coffee spending. They find that money spent on coffee has a variance of 21.00 and that income explains 72% of money spent on coffee. Perform an F-test to check whether income has a significant effect on coffee-spending at the 95% confidence level (Hint: create the ANOVA table as seen in an Excel output). Provide the hypotheses (Ho and Ha), the Fcrit, Fempirical, and the decision rule. Should Starbuck’s marketing manager target individuals with high income?

Answer 1

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