Jenny Wilson is the owner and broker of a real estate company in Montgomery, Ala
ID: 1204041 • Letter: J
Question
Jenny Wilson is the owner and broker of a real estate company in Montgomery, Alabama. This company is known as Jenny Wilson Realty. for her real esate company, Ms. Wilson wants to develop a regression model to explain the selling price (SP) for a house based on the size of the house measured in terms of the square footage of the house (SF), and the age of the house (AGE). For her analysis, Ms. Wilson gathers the data shown below.
Selling Price (SP) in $ Square Footage (SF) Age
95,000 1,926 30
119,000 2,069 40
124,800 1,720 30
135,000 1,396 15
142,800 1,706 32
145,000 1,847 38
159,000 1,950 27
165,000 2,323 30
182,000 2,285 26
183,000 3,752 35
200,000 2,300 18
211,000 2,525 17
215,000 3,800 40
219, 000 1,740 12
1.In this study which is the dependent variable?
2. In this study which variables are the independent or explanatory variables?
3. Write an equation to show the relationship between the dependent and independent variables. Use symbols given for the different variables to do this.
4.What method of technique qould you use in order to estimate the unknown coeifficients (or parameters) in the equation specifiied for question 3 above?
Explanation / Answer
1) In this study the selling price is the dependent variable .
2) In this study the square footage and the age are the independent or explanatory variables.
3) Let P denote the selling price which is the dependent variable . Let SF denote the square footage and A denote the age of the house .
P = b0 + b1 SF + b2 A
b0= point of intercept on Y axis
b1 = corresponding change in P for each unit change in SF , while A is held constant .
b2 = corresponding change in P for each unit change in A , while SF is held constant .
b1 and b2 are known as coefficient of net regression .
4) Multiple regression is used to estimate the unknown coeifficients (or parameters) in the equation specifiied for question 3 above.
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