SCENARIO 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 $$Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }$$
where
$$\begin{array} { l }
X _ { 1 } = \text { mortgage rate in } \% \
X _ { 2 } = 1 \text { if SF, } 0 \text { if LA } \
Y = \text { demand in } \$ 100 \text { per capita }
\end{array}$$
-Referring to SCENARIO 13-13, the fitted model for predicting demand in Los Angeles is_.
A)10 + 5X1
B)10 + 13X1
C)15 + 8X2
D)18 + 5X2

Question

SCENARIO 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 $$Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }$$
where
$$\begin{array} { l } 
X _ { 1 } = \text { mortgage rate in } \% \
X _ { 2 } = 1 \text { if SF, } 0 \text { if LA } \
Y = \text { demand in } \$ 100 \text { per capita }
\end{array}$$
-Referring to SCENARIO 13-13, the fitted model for predicting demand in Los Angeles is_.
A)10 + 5X1
B)10 + 13X1
C)15 + 8X2
D)18 + 5X2

Quizplus · Accepted Answer

For Los Angeles, $X_2 = 0$ (since $X_2 = 1$ if SF, $0$ if LA). Substituting $X_2 = 0$ into the model $Y = 10 + 5X_1 + 8X_2$ gives $Y = 10 + 5X_1$, which corresponds to choice A.

SCENARIO 13-13 an Econometrician Is Interested in Evaluating the Relationship Y=10+5X1+8X2Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }Y=10+5X1​+8X2​

SCENARIO 13-13
an Econometrician Is Interested in Evaluating the Relationship $Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }$