14.) Diamond Properties specializes in custom-home re-sales in the Garden Path E

Question

14.) Diamond Properties specializes in custom-home re-sales in the Garden Path Estates, an exclusive subdivision in rural Atlanta, Georgia. A random sample of nineteen custom homes currently listed for sale provided the information on size and price. Below is the regression output and the scatterplot. Here x denotes size, in hundreds of square feet, rounded to the SIZE VS PRICE Diamond Properties Fitted line nearest hundred, and y denotes price, irn thousands of dollars, rounded to the PRICE 500 450 400 350 300 250 , nearest thousand. Simple linear regression results: endent Variable Price R-s Est. Error. SD 28.1 with DF 1 Variable Estimate/Coefficient Std. Error t-Value Prob./P-Value Constant 30 35 40 45 50 0.1 0.00 SIZE Size 11.2 0.8

Explanation / Answer

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a) Equation:

Price = 11.2 * size - 99.9

b) R^2 = 0.851

Correlation coef = sqrt(R^2)

r = 0.922

c) Price = 11.2 * size - 99.9

So, price and size are positively related. If square footage increases by 1 unit (100 square footage), the price will increase by 11.2 units or 11.2 thousand dollars.

d) Slope = 11.2

It gives us change in price over change in size of the house.

So, it units are $/sq foot

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