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A salon is currently located far-off from the main city. The owner is considering to shift his salon close to the main city as it
A salon is currently located far-off from the main city. The owner is considering to shift his salon close to the main city as it would increase his revenues. However, he supposes that as he moves closer to the city, he would have to pay a higher rent. He collects data by surveying 150150 prospective locations and estimates the OLS regression: ModifyingAbove PR with caret Subscript i Baseline equals 2.3 minus 1.2 d Subscript iPRi=2.31.2di, where ModifyingAbove PR with caret Subscript iPRi represents the predicted extra rent (measured in thousands of dollars) he has to pay corresponding to its distance (d Subscript idi) (measured in kilometers or km) between the salon and the main city. From the sample data, he makes the following calculations. Summation from i equals 1 to 150 left parenthesis PR Subscript i Baseline minus PR overbar right parenthesis squared equals 160.23i=1150PRiPR2=160.23. Summation from i equals 1 to 150 left parenthesis PR Subscript i Baseline minus ModifyingAbove PR with caret right parenthesis squared equals 154.16i=1150PRiPR2=154.16. According to the estimated regression function, if the owner moves one km towards the city he has to pay an extra rent of $1 comma 2001,200. He wants to check how well
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