ALSO - Assumptions about the Random Error e: E() = ____ The variance of is _____

Question

ALSO - Assumptions about the Random Error e:

E() = ____

The variance of is _________ for all x.

The probability distribution of e is _______

The error terms are ________________

Exercise 2.1 A Realtor is interested in modeling the selling prices ofhouses in a metropolitan area. Three independent variables are selected to use in the model and are defined as: Y the selling price in thousands of dollars X1 the square footage of a house C O x the number of bedrooms in a house X3 the age of a house in years Now write the regression model to be used in predicting the selling price for a house. Exercise 2.2 A hotel manager is concerned about hotel room rates for a large chain of hotels. The variables to be used in this research is defined as follows: Y the daily rate of a room Xi the population of the city X2 the rating of the hotel (1 star to 5 stars) X3 the number of rooms in the hotel X4 the number of hotels in the city Now write the regression model to be used in predicting the room rates forthis hotel.

Explanation / Answer

Here the realtor is interested to mode the selling price of house.

We have the variables as follows:

Y = the selling price in thousands of dollars

X1 = the square foot of a house

X2 = the number of bathroom in a house

X3 = the age of a house in years

Here we have more than one independent variables so we use multiple regression here. We can write the equation of the multiple regression as follows:

y^ = b0 + b1x1 + b2x2++ b3x3

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