A Realtor Wants to Predict and Compare the Prices of Homes

question 81

Essay

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 + β₁ Size + β₃ Loc1 + β₄ Loc2 + ε
Model C: Price = β₀ + β₁Size + β₂Age + β₃ Loc1 + β₄ Loc2 +ε
where,
Price = the price of a home (in $1,000s)
Size = the square footage (in sq.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. Note: The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Using Model B,compute the predicted price of a 2,500-square-foot home in Location 1.

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Definitions:

Permanence

The quality or state of being permanent; enduring without significant change.

Indefinitely

For an unknown or unstated length of time, often implying an extended period that has no predetermined end.

Digital Manipulation

Altering media so that the images captured are changed from the way they were originally seen by the human eye.

Human Eye

An organ of vision in humans and other animals, allowing for the perception of light and facilitating the sense of sight.