Question

In: Economics

State     Price     Size NJ        375       2.1 NJ        200       0.9 NJ &nbs

State     Price     Size

NJ        375       2.1

NJ        200       0.9

NJ        599       2.3

NJ        365       2.1

NJ        220       2.1

NJ        250       1.9

NJ        410       2.2

NJ        429       2.8

NJ        325       2

NJ        235       1.1

NY       145       1.3

NY       875       2.9

NY       300       1.5

NY       370       1.1

NY       268       1.5

NY       1399     4.8

NY       1125     3.1

NY       299       1.4

NY       110       1.2

NY       2999     6

PA        282       2.6

PA        135       1.3

PA        179       1.8

PA        800       3

PA        145       1.2

PA        170       1.6

PA        495       2.9

PA        224       1.5

PA        325       2.5

PA        180       1.9

NJ        330       2.7

NJ        375       1.2

NJ        225       1.7

NJ        1150     5

NJ        127       1.5

NJ        499       4.8

NJ        250       1.2

NJ        430       1.8

NJ        320       2.3

NJ        150       1.1

NY       170       1

NY       269       1.5

NY       150       1

NY       288       1.8

NY       350       1.3

NY       120       0.9

NY       309       2.4

NY       1500     1.5

NY       635       2.5

NY       350       0.9

NY       459       1.8

NY       275       2.9

NY       275       1.8

NY       2500     3.7

NY       187       1.4

NY       238       1.7

NY       155       0.7

NY       175       1.6

NY       569       3.2

NY       105       1.2

CA        500       3.2

CA        995       3.7

CA        609       2.2

CA        1199     2.8

CA        949       1.4

CA        415       1.7

CA        895       2.1

CA        775       1.6

CA        109       0.6

CA        5900     4.8

CA        219       1.1

CA        255       1.2

CA        86        0.6

CA        62        1.2

CA        165       1.9

CA        1695     6.9

CA        499       1.4

CA        47        1.5

CA        195       2

CA        775       1

CA        199       1.4

CA        480       3

CA        173       0.9

CA        189       2.5

CA        230       1.7

CA        380       2.1

CA        110       0.8

CA        499       1.3

CA        399       1.4

CA        2450     5

NJ        845       3.4

NJ        220       2.1

NJ        215       1.8

NJ        430       1.8

NJ        208       1.3

NJ        375       1.2

NJ        749       3

NJ        245       1.2

NJ        435       1.6

NJ        669       4.2

PA        190       2.2

PA        219       1.4

PA        125       1.3

PA        125       1.2

PA        160       1.5

PA        189       1.4

PA        270       1.8

PA        90        1.3

PA        199       1.6

PA        199       1.6

4. Using appropriate software, estimate the house price regression. Use the table provided below to report your regression results.

Price

coefficient

std error

t-statistic

p-value

Size

Intercept

5. Give a brief interpretation of the intercept and slope estimates.

6. Test whether size is an effective predictor of house prices in the regression model. State your null and alternative hypotheses and report the test statistic, decision rule, and conclusion to the test.

7. Using appropriate software plot the data points and the estimated regression line on a graph. Comment on the appearance of the graph and, in particular, whether it reveals anything important about the regression.

Solutions

Expert Solution

4.

Coefficients

Standard Error

t Stat

P-value

Size

51.8357

16.9748

3.0537

0.0028

Intercept

211.9866

39.1926

5.4088

0.0000

5. Intercept =211.99 or 212 means even when the value of size is zero, the average value of price is 212

Size 51.84 means, for a one unit increase in size the value of price increases by 51.84 units

6. Yes. As the P-value of size is less than 0.05, size is a significant variable in predicting the house prices.

Null hypothesis: Size does not has any influence on price

Alternate hypothesis:  Size does has influence on price

Test statistic: P-value to be less than 0.05

Decision rule: If the P-value is than 0.05, then null hypothesis can be rejected else it needs to be accepted

Conclusion: As the P-value of size is less than 0.05, null hypothesis is rejected and alternate hypothesis is accepted

7.

As the regression line is in accordance with the equation and there is an increasing trend in increase in price with the increase in size


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