Answer:
a-1. The predicted price of a house with ocean views and square footage of 2,000 is $411,500.00.
a-2. The predicted price of a house with ocean views and square footage of 3,000 is $531,500.00.
b-1. The predicted price (in $1,000s) of a house without ocean views and square footage of 2,000 is $358,900.
b-2. The predicted price of a house without ocean views and square footage of 3,000 is $478,900.00.
c. The correct option is An ocean view increases the value of a house by approximately $52,600.
Step-by-step explanation:
Given:
yˆ = 118.90 + 0.12x + 52.60d ………………. (1)
a-1. Compute the predicted price (in $1,000s) of a house with ocean views and square footage of 2,000. (Round intermediate calculations to at least 4 decimal places. Round your answer to 2 decimal places.)
This implies that we have:
x = 2,000
d = 1
Substituting the values into equation (1), we have:
yˆ = 118.90 + (0.12 * 2000) + (52.60 * 1) = 411.50
Since the predicted price is in $1,000s, we have:
yˆ = 411.50 * $1000
yˆ = $411,500.00
Therefore, the predicted price of a house with ocean views and square footage of 2,000 is $411,500.00.
a-2. Compute the predicted price (in $1,000s) of a house with ocean views and square footage of 3,000. (Round intermediate calculations to at least 4 decimal places. Round your answer to 2 decimal places.)
This implies that we have:
x = 3,000
d = 1
Substituting the values into equation (1), we have:
yˆ = 118.90 + (0.12 * 3,000) + (52.60 * 1) = 531.50
Since the predicted price is in $1,000s, we have:
yˆ = 531.50 * $1000
yˆ = $531,500.00
Therefore, the predicted price of a house with ocean views and square footage of 3,000 is $531,500.00.
b-1. Compute the predicted price (in $1,000s) of a house without ocean views and square footage of 2,000. (Round intermediate calculations to at least 4 decimal places. Round your answer to 2 decimal places.)
This implies that we have:
x = 2,000
d = 0
Substituting the values into equation (1), we have:
yˆ = 118.90 + (0.12 * 2000) + (52.60 * 0) = 358.90
Since the predicted price is in $1,000s, we have:
yˆ = 358.90 * $1000
yˆ = $358,900.00
Therefore, the predicted price of a house without ocean views and square footage of 2,000 is $358,900.00.
b-2. Compute the predicted price (in $1,000s) of a house without ocean views and square footage of 3,000. (Round intermediate calculations to at least 4 decimal places. Round your answer to 2 decimal places.)
This implies that we have:
x = 3,000
d = 0
Substituting the values into equation (1), we have:
yˆ = 118.90 + (0.12 * 3,000) + (52.60 * 0) = 478.90
Since the predicted price is in $1,000s, we have:
yˆ = 478.90 * $1000
yˆ = $478,900.00
Therefore, the predicted price of a house without ocean views and square footage of 3,000 is $478,900.00.
c. Discuss the impact of ocean views on the house price.
Since the coefficient of d in equation (1) is 52.60 and positive, and the predicted price is in $1,000s; the correct option is An ocean view increases the value of a house by approximately $52,600.
