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 ________.
A) 10 + 5X₁
B) 10 + 13X₁
C) 15 + 8X₂
D) 18 + 5X₂

Question

Quizplus · Accepted Answer

The variable X₂ is equal to 0 for LA and therefore does not affect the fitted model. The fitted model for LA is simply Y = 10 + 5X₁.

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