Question

A random sample of records of sales of homes from February 15 to April 30, 1993, from the files maintained by the Albuquerque Board of Realtors gives the Price and Size (in square feet) of 117 homes. A regression to predict Price (in thousands of dollars) from Size has an R-squared of 71.4%. The residuals plot indicated that a linear model is appropriate.
Required:
a. What are the variables and units in this regression?
b. What units does the slope have?
c. Do you think the slope is positive or negative? Explain.

Answer 1

Answer:

A)

i) Size( x )  ( measured in ft^2 )

ii) Price ( y ) ( measured in dollars )

B) unit of slope = dollar per square foot

C) slope will be positive

Explanation:

A) The variables and units in this regression are

i) Size( x )  ( measured in ft^2 )

ii) Price ( y ) ( measured in dollars )

B) Units of the slope

unit of slope = dollar per square foot (i.e.  y / x )

C)  The slope will be positive given that the increase of home size is directly proportional to the increase in price