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How do I classify cars into income brackets?
Message posted by Erwin Yamsuan on October 16, 1999 at 12:00 AM (ET)
I am a 2nd year management major from the Philippines and I have to do a project for my statistics class. It has something to do with seeing if income bracket (A, B, or C) is independent with preference for type of fuel used (premium or unleaded). What I am having a hard time with is classifying the cars into the different income brackets. What we did was stay in a gas station for a whole day and tally the different cars and the fuel that they bought. However, I have no idea how to classify them into the different income brackets so as to complete my project. I cannot go on with my test of independence without classifying the cars. Any help will be appreciated. Thanks!
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Re: How do I classify cars into income brackets?
Message posted by JG on October 17, 1999 at 12:00 AM (ET)
You can classify them anyway you please just so that you have data for your Chi-squared test of independence. That part of your assignment probably will not be checked. If you wish, you can simply estimate how much each car cost or how much it cost per year to maintain it. Once you have the year, make, and model of the car this information can be looked up. However, for you puropses a simple estimate of how much this car would cost new is probably adequate.
Re: How do I classify cars into income brackets?
Message posted by Bill on October 17, 1999 at 12:00 AM (ET)
From what you have presented, the car type (price, I assume) is a proxy measure for the income level of the driver. That is, since you do not have a measure of the income level of the driver, you will use the price of the car as a proxy measure for income. This is based on the assumption that people in higher income brackets tend to buy more expensive cars, although for this class exercise the underlying assumption does not matter. Now, if you recorded the make and model of each car at the station, e.g., 1989 Honda Accord, then you could go to www.kbb.com to get the retail value of the car. (Don't worry about add-ons). Now if the retail value is between 0 - $15,000 then the income bracket is Level A, if retail value is 15,001-30,000 the bracket is Level B, and >30,000 the Level C. Unless you have instructions otherwise then you can select the range for each level (i.e., don't use my arbitrary ranges.) So, based on the retail value of the car, you have assigned each observation to an income bracket (A vs B vs C).
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