What does the intercept term in a price regression represent?
Correct Answer
A) The predicted price when all predictors equal zero
Why this is correct: In a regression equation of the form y = a + b1*x1 + b2*x2..., the intercept (a) is the predicted value of the dependent variable (e.g., price) when all independent variables (e.g., size, bedrooms) are equal to zero. In real estate, this often represents a theoretical baseline that may not be practically meaningful. Why the other choices are wrong: It is not the average sale price across the sample; that is the mean of y. It is not the share of variation explained; that is R-squared. It is not an adjustment applied to every comparable; the coefficients (b1, b2...) function as adjustments. Exam tip: The intercept is the starting point of the regression line. Don't over-interpret it, especially when zero values for predictors are unrealistic.
Why This Is the Correct Answer
Why this is correct: In a regression equation of the form y = a + b1*x1 + b2*x2..., the intercept (a) is the predicted value of the dependent variable (e.g., price) when all independent variables (e.g., size, bedrooms) are equal to zero. In real estate, this often represents a theoretical baseline that may not be practically meaningful. Why the other choices are wrong: It is not the average sale price across the sample; that is the mean of y. It is not the share of variation explained; that is R-squared. It is not an adjustment applied to every comparable; the coefficients (b1, b2...) function as adjustments. Exam tip: The intercept is the starting point of the regression line. Don't over-interpret it, especially when zero values for predictors are unrealistic.
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