A local real estate company wants to better understand the housing market in the Seattle area. The company hires you to do some analysis. Suppose that you have collected information on the selling price of 138 houses that have recently sold.Now suppose that in addition to the selling prices you also have data on some other characteristics of these 138 houses. The information available on each house is as follows:

PRICE = selling price (in $1,000).

SIZE = gross living space (in square feet).

AGE = age of the house (in years).

BDRM = number of bedrooms.

DOWNTOWN = 1 if the house is in downtown Seattle, 0 if outside downtown.

You run a multiple regression analysis on this data using SIZE, AGE, BDRM and DOWNTOWN to predict PRICE, which produces the following report:

Adj-R Square	0.776
Standard Error	86.772
	Coefficients	Lower 95%	Upper 95%
Intercept	180.833	-871.169	1232.834
SIZE	0.307	0.144	0.470
AGE	-3.571	-7.650	0.508
BDRM	45.421	-51.183	142.024
DOWNTOWN	175.341	28.634	322.048

One of your colleagues runs a different regression on these 138 houses, using only SIZE and DOWNTOWN as the independent variables to predict PRICE. The regressions results are as follows:

Adj-R Square	0.783
Standard Error	82.26
	Coefficients	Lower 95%	Upper 95%
Intercept	185.833	-866.9	1237.4
SIZE	0.320	0.157	0.483
DOWNTOWN	178.134	31.434	325.865

a) Is the 2-variable regression model superior to the 4-variable model, or not? Explain.

b) A friend of yours is shopping for a house and is interested in a particular three-bedroom house in downtown Seattle, which is 57 years old and has 1,750 square feet of gross living pace. The asking price for the house is $900,000. Using the regression model that is your answer to part (a), would you say that the asking price is a bargain or not? Why?

c) Suppose that you are required to use all four variables from the first regression (i.e., SIZE, AGE, BDRM, DOWNTOWN). Discuss how you could possibly still use regression analysis to obtain a statistically significant model.

d) In the second model, the coefficient for DOWNTOWN is estimated to be 178.134. What is your interpretation of this number?