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
Where;
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 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.
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 ...
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