An agent for a residential real estate company in a large city has the business objective of developing more accurate estimates of the monthly rental cost for apartments. Toward that goal the agent would like to use the size of an apartment, as defined by square footage to predict the monthly rental cost. The agent selects a sample of 25 apartments in a particular residential neighborhood and collects the following data:
Size (Square feet)
Rent ($)
850
1950
1450
2600
1085
2200
1232
2500
718
1950
1485
2700
1136
2650
726
1935
700
1875
956
2150
1100
2400
1285
2650
1985
3300
1369
2800
1175
2400
1225
2450
1245
2100
1259
2700
1150
2200
896
2150
1361
2600
1040
2650
755
2200
1000
1800
1200
2750
a. Construct a scatter plot
b. Use the least-squares method to determine the regression coefficients b0 and b1
c. Interpret the meaning of b0 and b1 in this problem.
d. Predict the monthly rent for an apartment that has 1000 square feet.
e. Why would it not be appropriate to use the model to predict the monthly rent for apartments that have 500 square feet?
f. Your friends Jim and Jennifer are considering signing a lease for an apartment in this residential neighborhood. They are trying to decide between two apartments, one with 1000 square feet for a monthly rent of $2275 and the other with 1200 square feet for a monthly rent of $2425. Based on (a) through (d), which apartment do you think is a better deal?