Correlation Analysis of Annual Income and Expenditure in New York Suburb

CORRELATION PROJECT
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Introduction
The objective of the given task is to analyse the underlying relationship between annual
income of household and the underlying expenditure. In this regards, data has been collected
from 30 households randomly selected across a suburb in New York. The face to face survey
method has been used to collect the required data. Considering the nature of information and
the fact that certain clarification may be required, face to face survey was preferred. Also, the
sample size 30 was chosen as it is least number of samples required in order to assume the
underlying distribution is normal.
Correlation and Regression Analysis
The scatter plot for annual income as the independent variable and annual expenditure as the
dependent variable is indicated as follows.
It is apparent from above that there is a positive correlation between income and expenditure
which is evident from the positive sloping best fit line. However, the magnitude of correlation
is 0.5879 which is only moderate and not high. This highlights that while income may be a
significant variable impacting the expenditure of households, there are other variables that
may be driving the same (Flick, 2015).
The output of the regression analysis is as highlighted below.