Regressor
(1)
(2)
(3)
(4)
(5)
Size
0.00042
(0.000038)
ln(Size)
ln(Size)2
Bedrooms
0.69
(0.054)
Pool
0.082
(0.032)
View
0.037
(0.029)
Pool X View
Condition
0.13
(0.045)
Intercept
10.97
(0.069)
Summary Statistics
SER
0.102
R2
0.72
0.68
(0.087)
0.0036
(0.037)
0.071
(0.034)
0.027
(0.028)
0.12
(0.035)
6.60
(0.39)
0.098
0.74
0.071
(0.034)
0.026
(0.026)
0.12
(0.035)
6.63
(0.53)
0.099
0.73
0.57
(2.03)
0.0078
(0.14)
0.071
(0.036)
0.027
(0.029)
0.12
(0.036)
7.02
(7.50)
0.099
0.73
0.69
(0.055)
0.071
(0.035)
0.027
(0.030)
0.0022
(0.10)
0.12
(0.035)
6.60
(0.40)
0.099
0.73
Variable definitions: Price = sale price ($); Size = house size (in square feet); Bedrooms = number of bedrooms; Pool = binary
variable (1 if house has a swimming pool, 0 otherwise); View = binary variable (1 if house has a nice view, 0 otherwise); Condition =
binary variable (1 if real estate agent reports house is in excellent condition, 0 otherwise).
QUESTION 4
In column (4), does the elasticity of price with respect to size depend on the size of the house? Use a 5% level of significance for the test.
The critical value is
The test statistic is
(two decimal places)
(two decimal places)
Is there sufficient evidence to conclude that the elasticity of price with respect to size depends on the size of the house? (Type Yes or No)
QUESTION 5
What can we conclude about the interaction term between pool and view in column (5)?
a. The interaction term is significant at the 10% level and its sign indicates that the impact of installing a pool has a smaller effect on price when the house has a
view.
b. The interaction term is significant at the 10% level and its sign indicates that the impact of installing a pool has a larger effect on price when the house has a
view.
c. The sign of the interaction term implies that the impact of installing a pool has a smaller effect on price when the house has a view, but the estimate is not
statistically significant at the 10% level.
d. The sign of the interaction term implies that the impact of installing a pool has a larger effect on price when the house has a view, but the estimate is not
statistically significant at the 10% level.
QUESTION 6
Regardless of your conclusion in Question 5, and continuing to use column (5), answer the following questions:
Find the approximate percent effect of adding a pool on the price of a house with a view.
Find the approximate percent effect of adding a pool on the price of a house without a view.
Report both answers to one decimal place without a percentage sign.