Question

An agent for a residential real estate company in a sub-urb located outside of Washington, DC, has the business objec-tive of developing more accurate estimates of the monthly rental cost for apartments. Toward that goal, the agent would like to use the size of an apartment, as defined by square footage to predict the monthly rental cost. The agent selects a sample of 48 one-bedroom apartments.

Interpret the meaning of b0 and b1 in this problem.

Size (Square feet)	Rent ($)
524	1110
616	1175
666	1190
830	1410
450	1210
550	1225
780	1480
815	1490
1070	1495
610	1680
835	1810
660	1625
590	1469
675	1395
744	1150
820	1140
912	1220
628	1434
645	1519
840	1105
800	1130
804	1250
950	1449
800	1168
787	1224
960	1391
750	1145
690	1093
840	1353
850	1530
965	1650
1060	1740
665	1235
775	1550
960	1545
827	1583
655	1575
535	1310
625	1195
749	1200
634	1185
641	1444
860	1385
740	1275
593	1050
880	1650
895	1340
692	1560

Please use Excel. The only thing I cant figure out is b1

Answer 1

We have calculated the b0 and b1 using excel:

Go to Data tool-->data analysis -->Regression-->Select range of x and y respectively -->click on labels--->ok

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.354314
R Square	0.125539
Adjusted R Square	0.106529
Standard Error	186.0407
Observations	48
ANOVA
	df	SS	MS	F	Significance F
Regression	1	228565.2	228565.2	6.603807	0.013481
Residual	46	1592112	34611.13
Total	47	1820677
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	992.9927	147.3669	6.738236	2.25E-08	696.3586	1289.627	696.3586	1289.627
Size (Square feet)	0.493167	0.19191	2.569787	0.013481	0.106873	0.879461	0.106873	0.879461

Here,b0=999.9927

and b1=0.493167

The scatter plot between x and y is:

Here,b1 is the slope it shows the amount change in y when we change the one unit of x in the model.

The model is: y = 0.4932x + 992.99

Cheers!!