Question

In: Statistics and Probability

Lets say Y=a+bX1+cX2+dX3+.......................up to n.....is the regression model (1) What would be the X1,X2,X3........Xn predictors for...

Lets say

Y=a+bX1+cX2+dX3+.......................up to n.....is the regression model

(1) What would be the X1,X2,X3........Xn predictors for house price in your neighborhood. Discuss from most important predictor to least important predictor.

(2) Similarly, What would be the predictors of your salary? Discuss in order.

Solutions

Expert Solution

(1)

For house price in our neighborhood, the predictors X1, X2, X3,..., Xn would be as follows arranged from most important predictor to least important predictor:

X1 = Size of the house

(increase of the facilities such as number of bed rooms, number of bath rooms, car porch, garden, play area for children etc.,will make the the house price increase)

X2 = Location of the house

(If the house is located in a convenient place connected with all requirements, house price will increase)

X3 = Demand for houses

(If the demand for houses increases faster than supply, house price goes up)

X4 = Interest rate

(if the interest rates are high, it will make house buying less attractive)

X5 = Economic Growth of the country

(If the economy grows, wages increase and so more people can afford to purchase a house, thus demand will increase and the house price will increase)

(2)

For our salary, the predictors X1, X2, X3,..., Xn would be as follows arranged from most important predictor to least important predictor:

X1 = Worker's capacity

If the worker is very efficient and highly qualified with specialized technical knowledge, his salary will be more.

X2 = Worker's age

If the worker has more experience, his salary will be more.

X3 = Hazardous work

If the work involves hazards, he will be paid more to compensate for the risks involved.

X4 = Profit of the company

If the company makes profits, salary of the workers will be high.

.X5 = Labor Union

(If a strong Labor Union is present in a company, it will exert prssure for high salary by bargaining with the management)

X6 = Cost of Living

(If the Cost of Living in a place is high, correspondingly the salary will also be high to equal the Consumer Price Index.

X7 = Government Legislation

(If the Government imposes conditions on minimum wage policy of the workers, their salary will increase.



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