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Subject Rea Lan

Steve Caples developed a regression model to appraise residential housing in Lake Charles, Louisiana. The model predicts housing price (Y) based on square footage (X) using the equation Ŷ = 13,473 + 37.65X. It had a coefficient of correlation of 0.63 based on recently sold homes in a neighborhood. The model predicts a house that is 1,860 square feet would sell for $71,089.50, but a house of that size recently sold for $95,000, indicating the model underestimated the price. Multiple regression could include additional variables like number of bedrooms to improve the model.

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OilandGas IndependentProject
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181 views

Subject Rea Lan

Steve Caples developed a regression model to appraise residential housing in Lake Charles, Louisiana. The model predicts housing price (Y) based on square footage (X) using the equation Ŷ = 13,473 + 37.65X. It had a coefficient of correlation of 0.63 based on recently sold homes in a neighborhood. The model predicts a house that is 1,860 square feet would sell for $71,089.50, but a house of that size recently sold for $95,000, indicating the model underestimated the price. Multiple regression could include additional variables like number of bedrooms to improve the model.

Uploaded by

OilandGas IndependentProject
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Steve Caples, a real estate appraiser in Lake Charles, Louisiana,


has developed a regression model to help appraise residential
housing in the Lake Charles area. The model was developed
using recently sold homes in a particular neighborhood. The
price (Y) of the house is based on the square footage (X) of the
house. The model is

Ŷ = 13,473 + 37.65X

The coefficient of correlation for the model is 0.63.


(a) Use the model to predict the selling price of a house that is
1,860 square feet.
(b) A house with 1,860 square feet recently sold for $95,000.
Explain why this is not what the model predicted.
(c) If you were going to use multiple regression to develop an
appraisal model, what other quantitative variables might be
included in the model?
(d) What is the coefficient of determination for this model?
Let X1= the number of pounds of beef in each pound of dog food
X2= the number of pounds of grain in each pound of dog food
Minimize. 90X1+.60X2 (minimize cost per pound of dog food)
Subject to: X1+X2=1 (total weight should be one pound)
10X1+6X2≥9 (at least 9 units of vitamin 1 in a pound)
12X1+9X2≥10 (at least 10 units of vitamin 2 in a pound)
X1, X2≥0 (non-negativity constraints)
Optimal Solution: X1= .75 X2= .25 Cost = $.825

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