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    Regression Analysis: Interpretation of regression equation

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    Suppose the regression equation that has been used to estimate the value of existing homes is as follows;

    Value = 10,000 + 50X1 + 5X2 + 10,000X3


    X1 is square feet of livable area

    X2 is the size of the lot measured in square feet

    X3 is an indicator variable for the presence of a pool (1 if yes, 0 if no)

    a. Interpret the meaning of the slopes of this equation.
    b. Estimate the value of a home with 2,000 square feet of livable area, 10,000 square foot lot, and a pool.

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    Solution Preview

    a. Interpret the meaning of the slopes of this equation.
    Value of the home increases by
    50 for every square feet increase in ...

    Solution Summary

    The solution interprets a regression equation. It interpret the meaning of the slopes of the equation and using the equation estimates the value of a home.