Exhibit 17

question 43

Essay

Exhibit 17.8.A realtor wants to predict and compare the prices of homes in three neighboring locations.She considers the following linear models:
Model A: Price = β₀ + β₁Size + β₂Age + ε,
Model B: Price = β₀ + β₁Size + β₂Loc1 + β₃Loc2 + ε,
Model C: Price = β₀ + β₁Size + β₂Age + β₃Loc1 + β₄Loc2 + ε,
where,
Price = the price of a home (in $thousands),
Size = the square footage (in square feet),
Loc1 = a dummy variable taking on 1 for Location 1,and 0 otherwise,
Loc2 = a dummy variable taking on 1 for Location 2,and 0 otherwise.
After collecting data on 52 sales and applying regression,her findings were summarized in the following table.

---

Definitions:

Moving Averages

A technique used in time series analysis to smooth out short-term fluctuations and highlight longer-term trends by averaging data points over a specified period.

Exponential Smoothing

A forecasting technique that applies decreasing weights to past data, more heavily weighting recent observations.

Recent Data

Information or statistics that have been collected in the near past and are up-to-date.

Long-Term Trend

A persistent movement in data over a long period, indicating a general direction.