Interpret the elasticity estimates for sqft, bedrooms, baths, and age. Which var

Question

Interpret the elasticity estimates for sqft, bedrooms, baths, and age. Which variable has the biggest effect on price? Which variable has he smallest effect?

. regress y x sqft Bedrooms Baths Age

Source | SS df MS Number of obs = 1,080

-------------+---------------------------------- F(5, 1074) = 557.28

   Model | 214.279863 5 42.8559726 Prob > F = 0.0000

Residual | 82.5925034 1,074 .076901772 R-squared = 0.7218

-------------+---------------------------------- Adj R-squared = 0.7205

   Total | 296.872366 1,079 .275136577 Root MSE = .27731

------------------------------------------------------------------------------

   y | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-------------+----------------------------------------------------------------

x | .2108912 .0722769 2.92 0.004 .0690713 .3527111

sqft | .000257 .0000288 8.92 0.000 .0002004 .0003135

Bedrooms | -.0704395 .0170633 -4.13 0.000 -.1039207 -.0369582

   Baths | .2116815 .0208575 10.15 0.000 .1707555 .2526076

Age | -.0064288 .0005207 -12.35 0.000 -.0074506 -.005407

   _cons | 9.512404 .484303 19.64 0.000 8.562116 10.46269

———————————————————————————————————————

. mfx, eyex

Elasticities after regress

y = Fitted values (predict)

   = 11.795182

------------------------------------------------------------------------------

variable | ey/ex Std. Err. z P>|z| [ 95% C.I. ] X

---------+--------------------------------------------------------------------

x | .1371088 .04699 2.92 0.004 .04501 .229208 7.66852

sqft | .0506719 .00568 8.92 0.000 .03954 .061804 2325.94

Bedrooms | -.0189884 .0046 -4.13 0.000 -.028004 -.009973 3.17963

   Baths | .035411 .00349 10.15 0.000 .028572 .04225 1.97315

   Age | -.0106686 .00086 -12.34 0.000 -.012362 -.008975 19.5741

------------------------------------------------------------------------------

Explanation / Answer

Here we have elasticity estimates: sqft = 0.0506719, Bedrooms = -0.0189884. Baths = 0.035411, Age =-0.0106686

Here highest elasticity is for sqft = 0.0506719, and smallest elasticity is for Age = -0.0106686

Hence variable sqft has the biggest effect on price and variable Age has the smallest effect.

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