Problem Set 13

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Use hprice1 data set. This is a data set with characteristics of homes and prices they sold for.

  1. The variable price, is measured in thousands of dollars. Create a new variable that measures the price of the home in simple dollar amounts. What is the average home price?
  2. Create a histogram showing the distribution of number of bedrooms (bdrms) with a bin for each whole number of rooms. Include it below
  3. It has been argued that colonial homes are sold at different prices than non-colonial homes. Test this assertion.
  4. Write out a model to test the relationship between the price a home and number of bedrooms.
  5. Graph out your model as a scatter plot and insert a best fit line. Include figure below.
  6. Estimate your model and include the OLS output below.
  7. Interpret
  8. Interpret
  9. Does adding an additional room to your home change the sale price? Explain.
  10. What is the R-squared and explain what it means in this scenario.
  11. Write out a model to test the relationship between the price of a home the square footage of the home.
  12. Estimate your model and include the OLS output below.
  13. Interpret
  14. Explain how your model says that a home with no square footage sells for a positive price, how can this be? (hint: it has nothing to do with the value of the land)
  15. Interpret
  16. Does adding more square footage to the home increase the price of the home? Explain.
  17. What is the R-squared and explain what it means in this scenario.
  18. Which model better describes the variation in home prices? Explain.

To answer the next set of questions, you may have to estimate other models.

  1. How much would my home increase in value (measured in percent) if I were to add two bedrooms?
  2. If I were to increase the square footage in my home by 1,500 square feet, what is the expected impact on the percent change of home prices?