Discussion:
Because of uncertainty in real estate markets, many homeowners are considering remodeling and constructing additions rather than selling. The most expensive room in the house to remodel is the kitchen, with an average cost of $23,400. In terms of resale value, is remodeling the kitchen worth the cost? The following cost and resale figures are published in a magazine for 11 cities:
City Cost Resale
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Atlanta $20,427 $25,163
Boston 27,255 24,625
Des Moines 22,115 12,600
Kansas City, MO 23,256 24,588
Louisville 21,887 19,267
Portland, OR 24,255 20,150
Raleigh-Durham 19,852 22,500
Reno 23,624 16,667
Ridgewood, NJ 25,885 26,875
San Francisco 28,999 35,333
Tulsa 20,836 16,292
Calculate a two-sample dependent or matched pair's t-test for the above data
Construct a 99% confidence interval level for the difference between cost and added resale value of kitchen remodeling. Assume differences are normally distributed
Test the hypothesis described in the problem
Use the five step process and analyze the results in relation to the information in the problem
Does it make sense to treat these variables (groups) as dependent or independent?
Why would it matter?
What are the trade-offs of the two types of t-tests?