In preparation for summer 2023, you decide to invest in a good air conditioner. You investigate...

Transcribed Image Text:

In preparation for summer 2023, you decide to invest in a good air conditioner. You investigate factors that determine the price of air conditioners. In your literature review, you find some of the following factors: • The air conditioners are rated based on their energy efficiency into seven classes A++, A+, A, B, C, D and E. Where A++ is the most efficient and E is the least efficient. Out of the seven classes, only those with a rating of B or better may be sold. • You observe the energy efficiency ratio (EER) which explains how well an air conditioner cools per unit of electricity used. . Decibel rating (DB) which indicates the air conditioner noise level. • British Thermal Units Rating (BTU) which measures the amount of thermal energy • The number of functional modes or settings (SET) (e.g.. Dehumidifier, Heat, Night, Remote control, etc.) (a) What are the expected signs of the variables included in this model? (b) Using a sample of 38 air conditioners, you estimate the following model: PRICE = -65.125 +0.046BTU, +16.518EER, +6.542SET, +2.638DB, (0.006) (7.884) (4.006) (1.672) N=38 R² = 0.84 Fstat 83.76 Standard errors are in brackets. i. Interpret the regression results (4) ii. Test for the significance of coefficients obtained in this model at the 5% level of significance. (8) iii. Test the hypothesis that the four explanatory variables explain a substantial variation in the prices of air conditioners. iv. V. (2) (2) Are there any additional variables that could be added to this model? Rather than using the energy efficiency ratio (EER), discuss the possibility of defining a dummy variable that captures energy efficiency? (2) In preparation for summer 2023, you decide to invest in a good air conditioner. You investigate factors that determine the price of air conditioners. In your literature review, you find some of the following factors: • The air conditioners are rated based on their energy efficiency into seven classes A++, A+, A, B, C, D and E. Where A++ is the most efficient and E is the least efficient. Out of the seven classes, only those with a rating of B or better may be sold. • You observe the energy efficiency ratio (EER) which explains how well an air conditioner cools per unit of electricity used. . Decibel rating (DB) which indicates the air conditioner noise level. • British Thermal Units Rating (BTU) which measures the amount of thermal energy • The number of functional modes or settings (SET) (e.g.. Dehumidifier, Heat, Night, Remote control, etc.) (a) What are the expected signs of the variables included in this model? (b) Using a sample of 38 air conditioners, you estimate the following model: PRICE = -65.125 +0.046BTU, +16.518EER, +6.542SET, +2.638DB, (0.006) (7.884) (4.006) (1.672) N=38 R² = 0.84 Fstat 83.76 Standard errors are in brackets. i. Interpret the regression results (4) ii. Test for the significance of coefficients obtained in this model at the 5% level of significance. (8) iii. Test the hypothesis that the four explanatory variables explain a substantial variation in the prices of air conditioners. iv. V. (2) (2) Are there any additional variables that could be added to this model? Rather than using the energy efficiency ratio (EER), discuss the possibility of defining a dummy variable that captures energy efficiency? (2)

Answer rating: 100% (QA)

a The expected signs of the variables included in the model are BTU Positive as higher BTU units imp... View the full answer