SCENARIO 14-6
One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X₁ ) and the amount of insulation in inches ( X ₂ ) . Given below is EXCEL output of the regression model.

Also SSR (X₁ | X₂) = 8343.3572 and SSR (X₂ | X₁) = 4199.2672
-Referring to Scenario 14-5,when the microeconomist used a simple linear regression model with sales as the dependent variable and wages as the independent variable,she obtained an r² value of 0.601.What additional percentage of the total variation of sales has been explained by including capital spending in the multiple regression?

Question

SCENARIO 14-6
One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X₁ ) and the amount of insulation in inches ( X ₂ ) . Given below is EXCEL output of the regression model.

Also SSR (X₁ | X₂) = 8343.3572 and SSR (X₂ | X₁) = 4199.2672
-Referring to Scenario 14-5,when the microeconomist used a simple linear regression model with sales as the dependent variable and wages as the independent variable,she obtained an r² value of 0.601.What additional percentage of the total variation of sales has been explained by including capital spending in the multiple regression?

Quizplus · Accepted Answer

The r² value of 0.601 in a simple linear regression model represents the coefficient of determination (R^2), which explains 60.1% of the variance in sales based on wages alone. When capital spending is included in a multiple regression model, if the R^2 value increases, the difference between the new R^2 value and the original 60.1% represents the additional percentage of the total variation of sales explained by including capital spending. Since the question does not provide the new R^2 value after including capital spending, we cannot calculate the exact increase. However, the correct answer choice indicates an additional percentage explained, suggesting that the inclusion of capital spending explains an additional portion of the variance in sales beyond what wages alone explained. The specific choice (D) 8.8%, would be the correct answer if it represents the increase in the R^2 value due to including capital spending, indicating that capital spending explains an additional 8.8% of the variation in sales that was not explained by wages alone.

SCENARIO 14-6 One of the Most Common Questions of Prospective House Buyers