TABLE 14-13
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 14-13,the fitted model for predicting demand in Los Angeles is ________.

Question

Quizplus · Accepted Answer

According to the problem, X₂ = 0 for Los Angeles. So, the term 8X₂ becomes 0 in the model equation. Therefore, the fitted model for predicting demand in Los Angeles reduces to Y = 10 + 5X₁.

TABLE 14-13 An Econometrician Is Interested in Evaluating the Relationship of Demand