Chapter 13.5, Problem 41PB

U.S. and foreign used cars Refer to the used car data file from Exercise 13.11. The prediction equation relating y = selling price of used car (in $) as a function of x₁ = age of car and x₂ = type of car (1 = US, 0 = Foreign) is ŷ = 20,493 − 1,185x₁ − 2,379x₂.

1. a. Using this equation, find the prediction equation relating selling price and age, separately for U.S. and foreign cars.
2. b. Predict by how much the price changes for a one year increase in the age of the car. Does this apply for both types of cars? Explain.
3. c. Find the predicted price of a (i) U.S. and (ii) foreign car that is eight years old. Show how the difference between them relates to a parameter estimate for the model.