SCENARIO 13-4
a Real Estate Builder Wishes to Determine How

question 103

Short Answer

SCENARIO 13-4
A real estate builder wishes to determine how house size (House) is influenced by family income (Income) and family size (Size).House size is measured in hundreds of square feet and income is measured in thousands of dollars.The builder randomly selected 50 families and ran the multiple regression.Partial Microsoft Excel output is provided below: $\begin{array}{lr}\hline{\text { Regression Statistics }} \\\hline \text { Multiple R } & 0.8479 \\\text { R Square } & 0.7189 \\\text { Adjusted R Square } & 0.7069 \\\text { Standard Error } & 17.5571 \\\text { Observations } & 50\\\hline \end{array}$

$\text { ANOVA }$
$\begin{array}{lrrrrr} & d f & \text { SS } & {M S} & F & \text { Significance } F \\\hline \text { Regression } & & & 37043.3236 & 18521.6618 & 0.0000 \\\text { Residual } & & 14487.7627 & 308.2503 & \\\text { Total } & & 49 & 51531.0863 & &\end{array}$

$\begin{array}{lrrrr}\hline & \text { Coefficients } & \text { Standard Error } &{t \text { Stat }} & \text { P-value } \\\hline \text { Intercept } & -5.5146 & 7.2273 & -0.7630 & 0.4493 \\\text { Income } & 0.4262 & 0.0392 & 10.8668 & 0.0000 \\\text { Size } & 5.5437 & 1.6949 & 3.2708 & 0.0020\\\hline \end{array}$

$\text { Also } \operatorname{SSR}\left(X_{1} \mid X_{2}\right)=36400.6326 \text { and } \operatorname{SSR}\left(X_{2} \mid X_{1}\right)=3297.7917$


-Referring to SCENARIO 13-4, one individual in the sample had an annual income of $40,000 and a family size of 1.This individual owned a home with an area of 1,000 square feet (House =10.00).What is the residual (in hundreds of square feet) for this data point?

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Definitions:

Consumption

The use of goods and services by households or individuals for personal or collective needs and satisfaction.

Tax Reduction

A decrease in the amount of taxes imposed by a government.

Price

The price anticipated, required, or paid in exchange for a particular item.

Quantity

The amount or number of a material or product available or produced.