The Mercer Human Resource Consulting website (www.mercer.com) lists prices of certain items in selected cities around the world. They also report an overall cost-of-living index for each city compared to the costs of hundreds of items in New York City (NYC). For example, London at 88.33 is 11.67% less expensive than NYC.
You’ll find the 2017 data for 17 cities in the data set Cost of Living. Included are the 2017 cost of living index, cost of a 3-bedroom apartment (per month), price of monthly transportation pass, price of a mid-range bottle of wine, price of a loaf of bread (1 lb.) and the price of a gallon of milk. All prices are in U.S. dollars.
Examine the relationship between the overall cost of living and the cost of each of these individual items by using linear regression. Verify the necessary conditions and describe the relationship in as much detail as possible (remember to look at direction, form and strength).
Identify any unusual observations (outliers), research and discuss.
Based on the linear regressions and your analysis, which item would be the best predictor of the overall cost in these cities? Which would be the worst? Are there any surprising relationships? Describe in detail your analysis, results and conclusions.