Exercise 17-21 Algo Compute the predicted price of a house with ocean views and

Question

Exercise 17-21 Algo

Compute the predicted price of a house with ocean views and square footage of 2,400 and 3,400, respectively. (Round your final answers to the nearest whole number.)

Compute the predicted price of a house without ocean views and square footage of 2,400 and 3,400, respectively. (Round your final answers to the nearest whole number.)

House price y is estimated as a function of the square footage of a house x; a dummy variable d that equals 1 if the house has ocean views and 0 otherwise; and a product of this dummy and the square footage xd. The estimated house price, measured in $1,000s, is given by = 84 + 0.14x + 36d + 0.02xd.

Explanation / Answer

a) Predicted price for 2400 = 84+0.14*2400+36*1+0.02*2400*1 = 504

Predicted price for 3400 = 84+0.14*3400+36*1+0.02*3400*1 = 664

b) Predicted price for 2400 = 84+0.14*2400+36*0+0.02*2400*0 = 420

Predicted price for 3400 = 84+0.14*3400+36*0+0.02*3400*0 =560

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