Compute the predicted price of a house with ocean views and square footage of 2,

Question

Compute the predicted price of a house with ocean views and square footage of 2,000 and 3,000, respectively. (Round your final answers to the nearest whole number.)

Compute the predicted price of a house without ocean views and square footage of 2,000 and 3,000, respectively. (Round your final answers to the nearest whole number.)

Discuss the impact of ocean views on the house price.

House price y is estimated as a function of the square footage of a house x; a dummy variable d that equals 1 if the house has ocean views and 0 otherwise; and a product of this dummy and the square footage xd. The estimated house price, measured in $1,000s, is given by = 72 + 0.12x + 47d + 0.02xd.

Explanation / Answer

1) With ocean views

2000 sqft: 72 + 0.12* 2000 + 47*1 + 0.02 * 1*2000 = 399

3000 sqft: 72 + 0.12* 3000 + 47*1 + 0.02 * 1*3000 = 539

2) Without ocean views

2000 sqft: 72 + 0.12* 2000 = 312

3000 sqft 72+0.12*3000 = 432

C) - Both the options are true as can be seen from examples

2000 sqft has prie difference of 87

3000 sqft has price difference of 107

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