Usually householdsconsumers education level is highly relate

Usually households/consumers education level is highly related to their debt level. The ratio of consumer liabilities to consumer financial assets rose from just over 10% in 1950 to more than 30% in 2009. However, recent researches points to a number of factors that bear on the consumer\'s decision of when and how much to borrow. Leading the list is the size of individual income, meaning that families with larger incomes tend to use greater amount of debt. How do you justify this positive debt-income relationship using a regression concept? Please be specific.

Solution

In order to justify the positive debt-income relation ship using a regression concept.

Conduct a random study and obtain the sample information of the family income and debts that they have/had.

The sample size should be large enough at least 40 observations should be considered.

The following are the assumptions to conduct regression

Fit a regression model and test the slope of the regression coefficient and find the \'r\' value between the variables.

If the \'r\' variable is >0 and significant, then we can justify the relationship is positive and signficant.