Arealtor in Arlington, Massachusetts, is analyzing the relationship between the

Question

Arealtor in Arlington, Massachusetts, is analyzing the relationship between the sale price of a home (Price), its square footage (Sqft), the number of bedrooms (Beds), and the number of bathrooms (Baths). She collects data on 36 recent sales in Arlington in the first quarter of 2009 for the analysis. The data is shown in the accompanying table. Price Sqft Beds Baths 784,000 2,583 3.0 822,000 2,500 4 2.5 713,000 2,400 3.0 689,000 2,200 3 2.5 685,000 2,716 3 3.5 645,000 2,524 3 2.0 432,692 1,891 1.5 454,667 1,786 2.5 718,056 2,567 2.5 585,000 1,947 3 1.5 583,000 2,224 2.5 379,333 2,175 3 1.0 764,400 2,509 3.0 780,000 2,149 2.5 537,000 2,907 2.5 516,000 1,951 2.0 738,111 2,531 2.5 714,000 2,418 4 3.0 495,000 1,692 2.0 463,000 1,714 3 2.0 639,800 2,310 3.0 631,400 2,359 3.0 435,000 1,500 3 1.5 431,700 1,896 1.5 414,000 1,182 1.5 401,500 1,152 1.0 478,800 1,660 2.0 253,333 896 1.0 285,000 954 1.0 375,900 2,275 1.0 620,000 1,675 2.0 459,375 1,590 2.0 356,500 1,431 2 2.0 412,500 1,703 2.0 412,500 1,831 307,500 3 2.0 1.0

Explanation / Answer

(a) Ran the linear regression model in R, to get the below results -

Price = 25095.35 + 103.63 Sqft + 22600.49 Beds + 114828.49 Baths

Intercept - 25095.35

Sqft - 103.63

Beds - 22600.49

Baths - 114828.49

b-1 The correct option is "For every additional square foot, the predicted price of a home increases by $103.63, holding number of bedrooms and bathrooms constant.

b-2 The correct option is "For every additional bedroom, the predicted price of a home increases by $22,600.49, holding number of square feet and bathrooms constant.

b-3 The correct option is "For every additional bathroom, the predicted price of a home increases by $114,828.49, holding number of square feet and bedrooms constant.

c. The regression equation is Price = 25095.35 + 103.63 Sqft + 22600.49 Beds + 114828.49 Baths

Price = 25095.35 + 103.63 * 2053 + 22600.49 * 3 + 114828.49 * 2 = $535306.19

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