TABLE 14-6 One of the most common questions of prospective house buyers pertains to the average cost of heating in dollars (Y). To provide its customers with information on that matter, a large real estate firm used the following 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit (X 1 ), the amount of insulation in inches (X 2 ), the number of windows in the house (X 3 ), and the age of the furnace in years (X 4 ). Given below are the EXCEL outputs of two regression models. Model 1 Note: 2.96869E-05 = 2.96869×10 -5 Model 2 Note: 2.9036E-06 = 2.9036×10 -6 -Referring to Table 14-6, the estimated value of the partial regression parameter β₁ in Model 1 means that A) all else equal, an estimated expected $1 increase in heating costs is associated with a decrease in the daily minimum outside temperature by 4.51 degrees. B) all else equal, a 1 degree increase in the daily minimum outside temperature results in a decrease in heating costs by $4.51. C) all else equal, a 1 degree increase in the daily minimum outside temperature results in an estimated decrease in mean heating costs by $4.51. D) all else equal, a 1% increase in the daily minimum outside temperature results in an estimated decrease in mean heating costs by 4.51%.

Question

Quizplus · Accepted Answer

The estimated value of the partial regression parameter β₁ in Model 1 is -4.51, indicating that all else equal, a 1 degree increase in the daily minimum outside temperature is associated with an estimated decrease in mean heating costs by $4.51. This is because as the temperature outside increases, less heating will be needed to keep the house warm, leading to lower costs. Therefore, choice C is the correct interpretation of the estimated value.

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