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 as well as answering the question sin clear full sentences.

Log (price) = 9.5 + 0.6 * log (sqm_land) + 0.17 * rooms - 0.04 * log (CO2)

N=900

R2 = 0.52

1a)  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?

1b) Calculate the degrees of freedom associated with these estimates. Is this high enough for standard normal critical values to be applied?

1c) Interpret the R2.

Answer rating: 100% (QA)

1a Calculation for the Price Increase Given the hedonic price model Log price 95 06 log sqmland 017 rooms 004 log CO2 Lets calculate the price increas... View the full answer