SCENARIO 1413 An econometrician is interested in evaluating

SCENARIO 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 Scenario 14-13, the fitted model for predicting demand in Los Angeles is ________.

a. 15 + 8X₂

_b. 18 + 5X₂

_c. 10 + 5X₁

_d. 10 + 5X₁

Solution

The fitted model for predicting demand in Los Angeles is :

Y = 10 + 5X₁ + 8X₂

Y = 10 + 5X₁ + 8* 0

   = 10 + 5X₁ + 0

Y = 10 + 5X₁