Consider the two regression models:
Consider the two regression models:
Pizza=β1+β2Income+β3Age+β4(Age×Income)+u
(1)
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(2)
where Pizza = Individual’s annual expenditure on pizza
Income = Individual’s annual income
Age = Individual’s age in years
Suppose that the estimated coefficients b1, b2, and b3 are all positive in both Model (1) and (2) and b4 is also positive in Model (1).
By including the interaction term (Age×Income)
in Model (1), what are we able to examine about the relationship between Pizza and Income and Age beyond what we can examine in the simpler Model (2)?
A. Whether the effect of Age on Pizza varies with Income.
B. Whether Income tends to be larger as Age increases.
C. If Income is higher, whether the predicted value of Pizza is higher, regardless of Age.
D. Whether Age and Income each have a positive influence on Pizza.