Consider a linear regression model where y represents the re

Consider a linear regression model where y represents the response variable and x and d are the explanatory variables; d is a dummy variable assuming values 0 or 1. The model is estimated as

y-hat = 15.5 + 3.5x 4.5d.

Solution

y-hat = 15.5 + 3.5x 4.5d

b) Compute y-hat for x = 2 and d = 1

Answer

y-hat = 15.5 + 3.5(2) 4.5(1) =15.5 +7-4.5 = 18

c)Compute y-hat for x = 2 and d = 0

Answer

y-hat = 15.5 + 3.5(2) 4.5(0) = 15.5 +7 = 22.5