A regression equation that predicts the price of homes in thousands of dollars is _t = 24.6 + 0.055x₁- 3.6x₂,where x₂ is a dummy variable that represents whether the house in on a busy street or not.Here x₂ = 1 means the house is on a busy street and x₂ = 0 means it is not.Based on this information,which of the following statements is true? A)On average,homes that are on busy streets are worth $3600 less than homes that are not on busy streets. B)On average,homes that are on busy streets are worth $3.6 less than homes that are not on busy streets. C)On average,homes that are on busy streets are worth $3600 more than homes that are not on busy streets. D)On average,homes that are on busy streets are worth $3.6 more than homes that are not on busy streets.

Question

Quizplus · Accepted Answer

According to the regression equation, the coefficient for the dummy variable x₂ is -3.6. This means that if x₂ = 1 (i.e., the house is on a busy street), the expected value of the house price would be lower by $3.6k as compared to x₂ = 0 (i.e., the house is not on a busy street). Therefore, on average, homes that are on busy streets are worth $3600 less than homes that are not on busy streets.

A Regression Equation That Predicts the Price of Homes in Thousands