Using the package “wooldridge’, and the data ‘hprice1’ (in R-Software) to estimate the model price =...

Using the package “wooldridge’, and the data ‘hprice1’ (in R-Software) to estimate the model price = β0 + β1sqrft + β2bdrms + u , where is the house price measured in thousands of dollars.

1. Write out the results in equation form.

2. What is the estimated increase in price for a house with one more bedroom, holding square footage constant?

3. What is the estimated increase in price for a house with an additional bedroom that is 140 square feet in size? Compare this to your answer in part 2

4. What percentage of the variation in price is explained by square footage and number of bedrooms?

5. The first house in the sample has sqrt = 4238 and bdrms = 7. Find the predicted selling price for this house from the OLS regression line.

6. The actual selling price of the first house in the sample was $400,000 (price = 400,000 ). Find the residual for this house. Does it suggest that the buyer underpaid or overpaid for the house?

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Expert Solution

orchestra answered 1 year ago

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