TABLE 14-6 One of the Most Common Questions of Prospective House Buyers

question 2

Multiple Choice

TABLE 14-6
One of the most common questions of prospective house buyers pertains to the average cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit (X₁) , the amount of insulation in inches (X₂) , the number of windows in the house (X₃) , and the age of the furnace in years (X₄) . Given below are the EXCEL outputs of two regression models.
Model 1
Note: 2.96869E-05 = 2.96869×10^-5
Model 2
Note: 2.9036E-06 = 2.9036×10^-6
-Referring to Table 14-6, the estimated value of the partial regression parameter β₁ in Model 1 means that

• A) all else equal, an estimated expected $1 increase in heating costs is associated with a decrease in the daily minimum outside temperature by 4.51 degrees.
• B) all else equal, a 1 degree increase in the daily minimum outside temperature results in a decrease in heating costs by $4.51.
• C) all else equal, a 1 degree increase in the daily minimum outside temperature results in an estimated decrease in mean heating costs by $4.51.
• D) all else equal, a 1% increase in the daily minimum outside temperature results in an estimated decrease in mean heating costs by 4.51%.

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