A real estate company wants to study the relationship betwee

A real estate company wants to study the relationship between house sales prices and some important predictors of sales prices. Based on data from recently sold homes in the area, the variables y = sales price (in thousands of dollars) x_1 = total floor area (in square feet) x_2 = number of bedrooms x_3 = distance to nearest high school (in miles) are used in a multiple regression model. The estimated model is y = 159 + 0.068x_121x_2 -7x3 . Answer the folowing questions for the interpretation of the coefficient of x_2 in this model. Holding the other variables fixed, what is the average change in sales price for each additional bedroom in a house? Is this change an increase or a decrease? increase decrease

Solution

Holding the other variables fixed, the average change in sales price for each additional bedroom in a house is 21 thousands of dollars.

The regression equation itself shows that the change is an increase.