Question - Assessment value versus sales price, continued. Refer to the previous exercise.
(a) Calculate the predicted selling prices for houses currently assessed at $155,000, $220,000, and $285,000.
(b) Suppose that these houses sold for $142,900, $224,000, and $286,000, respectively. Calculate the residual for each of these sales.
(b) Suppose that these houses sold for $142,900, $224,000, and $286,000, respectively. Calculate the residual for each of these sales.
(d) Using the result from part (c), compare the estimated regression line with y = x, which says that, on average, the selling price is equal to the assessed value. Is there evidence that this model is not reasonable? In other words, is the selling price typically larger or smaller than the assessed value? Explain your answer.