StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Econometrics for Calculation of Selling Price of Home - Math Problem Example

Cite this document
Summary
The paper “Econometrics for Calculation of Selling Price of Home” is a cogent variant of the math problem on macro & microeconomics. The figure below indicates a scatter graph of the selling price of the home, dollars (price) versus age of home at the time of sale, years (age). The scatter plot indicates a downward slope from left to right…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER91.1% of users find it useful

Extract of sample "Econometrics for Calculation of Selling Price of Home"

Econometrics [Name] [Course] [Lecturer] [Unit Code] [Date of Submission] Q1. The figure below indicates a scatter graph of the selling price of home, dollars (sprice) versus age of home at time of sale, years (age). The scatter plot indicates a downward slope from left to right. The downward slope implies that the age of a home at time of sale and the selling price of a home are negatively related; as the age of a home at time of sale increases, the selling price decreases. Q2. Below is model 1: The above model (1) indicates that 1154.3 is the constant selling price of a home in dollars, the selling price of a home goes up by 10680 dollars if the living area increases by a unit square feet, a unit increase in the age of a home decreases the selling price of the home by 11.33 dollars, an extra single bedroom decreases the selling price of a home by 15552.4 dollars whereas an extra single bathroom decreases the selling price of a home by 7019.3 dollars. Livarea has a positive (+) sign which is in actuality in line with my expectations, Age has a negative (-) sign which is also in line with my expectations, Beds has a negative (-) sign which is not in line with my expectations, and, Baths has a negative (-) sign which is not in line with my expectations. Q3. Below is the hypothesis testing for each individual coefficient; : : Test statistic used is: : Computed value = = Using a 5% significance level and 1495 degrees of freedom, the critical value, 1.96. 1.96, hence, we reject the null hypothesis and conclude that at 5% significance level; the price of a home depends on living area. = Using a 5% significance level and 1495 degrees of freedom, the critical value, 1.96. 1.96, hence, we reject the null hypothesis and conclude that at 5% significance level; the price of a home depends on its age at time of sale. = Using a 5% significance level and 1495 degrees of freedom, the critical value, 1.96. -7.90 < -1.96, hence, we fail to reject the null hypothesis and conclude that at 5% significance level; the price of a home does not depend on the number of bedrooms. = Using a 5% significance level and 1495 degrees of freedom, the critical value, 1.96. - < -1.96, hence, we fail to reject the null hypothesis and conclude that at 5% significance level; the price of a home does not depend on the number of bathrooms. Q4. The difference in prices is given by - ( = 1131.64 – 1041 = $90.64. The 95% Confidence interval is given by; 90.64 ± = 90.64 ± = 90.64 ± 0.66 = (89.98, 91.3). The 95% Confidence interval implies that the difference in price of a home 2 years old and a home which is 10 years old lies between 89.98 and 91.3. Q5. Testing the overall significance of the model; : , :,, , , or all are nonzero Test statistic: Critical value = = = 3.37 Computed value: = 6.8795e+010 6.8795e+010 < 3.371, we fail to reject the null hypothesis at 1% significance level and conclude that all and/or each of the variables are not statistically significant. Q6. Hypothesis testing for increase in living area The difference in price is given by ( - = $21,360. Testing hypothesis; : : Test statistic: Critical value: = = 1.645 Computed value: = = 9647 Given that 9647 > 1.645, we reject the null hypothesis and conclude that at 5% significance level, the increase in price is more than $20,000. Q7. Below is model 2; F-test; : : Test statistic: Critical value: = = 3.85 For livareasquared the computed value = = 1.5e+13/1.3e+15 = 115.38 Given that 115.38 > 3.85, we reject the null hypothesis and conclude that at 5% significance level, there is enough evidence that living area squared is a significant predictor of the selling price of a home. For agesquared computed value = = 3.0e+14/1.3e+15 = 23.08 Given that 23.08 > 3.85, we reject the null hypothesis and conclude that at 5% significance level, there is enough evidence that age squared is a significant predictor of the selling price of a home. Q8. Below is model 3; The above model 3 indicates that 10.75 is the constant log of the selling price of a home. The log of the selling price of a home increases by 0.08 as a result of a unit increase in living area square feet. The log of the selling price of a home decreases by 0.001 due to a unit increase in living area square feet squared. The log of the selling price of a home decreases by 0.01 as a result of a unit increase in age of a house. The log of the selling price of a home increases by 0.0001 due to a unit increase in age squared. The log of the selling price of a home decreases by 0.08 as a result of a unit increase in the number of bedrooms. Q9. Using model 3; The log of the selling price of a home = 11.62. The antilog of 11.62 = 111301.72, hence, the price of a 10 year old house with a living area of 2,000 square feet, and three bedrooms is $111301.72. Question 10 Choosing between model 2 and model 3, model 3 is preferable. A log-linear model 3 is more sensitive and it is much easier to interpret. Also, generally, in statistics transformation of variables in a model produces more meaningful and accurate results and this is true for model 3. Logarithms make variations between large values less meaningful and add meaning to small differences. Also, logarithms help to reduce errors. Therefore, the use of the natural logarithm of the dependent variable in model 3 played a big role in ensuring that the errors are minimised. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Econometrics for Calculation of Selling Price of Home Math Problem Example | Topics and Well Written Essays - 1000 words, n.d.)
Econometrics for Calculation of Selling Price of Home Math Problem Example | Topics and Well Written Essays - 1000 words. https://studentshare.org/macro-microeconomics/2081498-econometrics
(Econometrics for Calculation of Selling Price of Home Math Problem Example | Topics and Well Written Essays - 1000 Words)
Econometrics for Calculation of Selling Price of Home Math Problem Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/macro-microeconomics/2081498-econometrics.
“Econometrics for Calculation of Selling Price of Home Math Problem Example | Topics and Well Written Essays - 1000 Words”. https://studentshare.org/macro-microeconomics/2081498-econometrics.
  • Cited: 0 times

CHECK THESE SAMPLES OF Econometrics for Calculation of Selling Price of Home

Bond Yield Measures Inform Investors of the Rate of Return on Bonds Under Different Assumptions

urrent yield measure/ Realized YieldThis measure of bond yield measures the rate of return of the bond in connection to the current market price.... To get the current yield, the coupon interest (annual) is dived by the prevailing market price.... The current yield is calculated using the formula below:Current yield= Annual coupon payment/ Market price (as a % of the face value/par value of the bond)For example, if an investor purchased a 3-year bond for $951....
8 Pages (2000 words) Assignment

Five Objectives of Central Bank

However, the main functions are (Touffut, 2009);price stability; the central bank regulates a country's inflation.... By definition, inflation refers to the persistent increase in price levels relative to goods and services, or the devaluation of the currency.... … The paper "Five Objectives of Central Bank" is a wonderful example of an assignment on macro and microeconomics....
12 Pages (3000 words) Assignment

Home Price Insights

71, we fail to reject the null hypothesis at 1% significance level and conclude that all and/or each of the variables, living area in square feet, age of home, number of bedrooms, number of bathrooms, do not have an influence on the price of a home.... nbsp;The scatter plot shows a downhill pattern moving from left to right indicative of a negative relationship between the age of a home and the living price of a home.... As the age of a home increases, the price of that home decreases....
3 Pages (750 words) Assignment

Capital Asset Pricing Model, Arbitrage Pricing Theory

… The paper "Capital Asset Pricing Model, Arbitrage Pricing Theory" is a perfect example of a finance and accounting report.... nbsp;The financial experts have come up with two approaches that are used to measure the expected returns of any given stock and investment in assets.... These approaches help the investors and the financial and investment analyst to come up with a portfolio of stock....
9 Pages (2250 words)

Recruitment and Selection Consultation

… The paper "Recruitment and Selection Consultation" is an outstanding example of a management essay.... For the purpose of completing the assignment, the paper will choose to use John's shoe collection.... This is a single shop stall in London that deals with men's and women's footwear.... The shop employs five employees but has the capacity for ten in order to increase efficiency....
8 Pages (2000 words) Essay

Economic Calculation Problems

The calculation problem is endemic in highly regulated sectors like health, where it is not the price system that coordinates resources, but bureaucrats and politicians.... … The paper "Economic calculation Problems" is a great example of a Macro & Microeconomics essay.... nbsp;The socialist economic calculation talks about how a socialist economy can potentially perform economic calculation owing to the lack of the law of value and financial prices given to capital goods as well as the private possession of the modes of production (Levy and Sandra, 2008)....
10 Pages (2500 words) Essay

The Problem of Economic Calculation

The problem of economic calculation of such a micro-economy in highly regulated sectors like health has been constantly present, affecting the performance of an entire economy.... A critical economic synthesis of the role of government in reforming major sectors reveals that it is the bureaucracy and politics are what coordinates resources and not the price, as it should be.... … The paper "The Problem of Economic calculation" is a great example of micro and macroeconomic coursework....
11 Pages (2750 words) Coursework

Business Decision Analysis: Linear Programing

One of the factors includes price elasticity.... This is how the customer behaves when the price changes for goods.... … The paper "Business Decision Analysis: Linear Programing" is a wonderful example of a research proposal on management.... We have utilized derivatives to help discover the minimums and maximums of a few capacities given by conditions....
12 Pages (3000 words) Research Proposal
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us