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QUESTION 1) Let's assume a hedonic price model for housing in Yellowland. Prices are a function of the square meters of the land on which
QUESTION 1) Let's assume a hedonic price model for housing in Yellowland. Prices are a function of the square meters of the land on which the house stands, the number of rooms, and CO2 emissions. Prices are expressed in yellowies (currency of Yellowland). The model is estimated as follows: Show your calculations (if any) as well as answering the questions in clear full sentences./ Log(price) = 9.5+ 0.6* log (sam land) + 0.17 * rooms - 0.04 * log (CO2) N=900 R2 = 0.52 1) Interpret the intercept. The intercept in this case 2) Interpret the coefficient on the square meter variable. 2 marks 2 marks 3) Interpret the coefficient on the rooms variable. 2 marks 4) Assume a CO2 level of 3, and a land area of 400 square meters. How much is the price of the house going to increase if we extend it from 2 to 3 rooms? 6 marks 5) Calculate the degrees of freedom associated with these estimates. Is this high enough for standard normal critical values to be applied? 2 marks 6) Interpret the R2. 2 marks Don't forget: Log referrers to natural logarithm! Total: 16 marks
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