TABLE 13-13
An econometrician is interested in evaluating the relationship of demand for building materials to mortgage rates in Los Angeles and San Francisco. He believes that the appropriate model is
Y = 10 + 5X1 + 8X2
where X1 = mortgage rate in %
X2 = 1 if SF, 0 if LA
Y = demand in $100 per capita
-Referring to Table 13-13, the fitted model for predicting demand in San Francisco is ________.
A) 10 + 5X₁
B) 10 + 13X₁
C) 15 + 8X₂
D) 18 + 5X₁

Question

Quizplus · Accepted Answer

To predict demand in San Francisco, we set X2 = 1. Therefore, the model becomes Y = 10 + 5X1 + 8(1) = 18 + 5X1. Thus, the fitted model for predicting demand in San Francisco is 18 + 5X1. Option D is the only choice that matches this description.

TABLE 13-13 An Econometrician Is Interested in Evaluating the Relationship of Demand