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Comm 295 - Class 3 Notes

# Comm 295 - Class 3 Notes - Comm 295 Estimation(3.2 3.2...

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Comm 295 Estimation (3.2) 3.2 REGRESSION ANALYSIS Regression analysis : a statistical technique used to estimate the mathematical relationship between a dependent variable (such as Qd) and one or more explanatory variables (eg price, income) Usually p is dependent variable (changes to clear market based on Qd ) Dependent variable : variable whose variation is to be explained Explanatory variables : factors that are thought to affect the value of the dependent variable Econometrics : use of regression analysis and related statistical methods in economics and business SIMPLE LINEAR REGRESSION - Simple : dependent variable depends on only ONE explanatory variable - Linear : relationship between 2 variables (such as Qd and p) is linear – drawn as straight line Linear Demand Curves Q = a + bp - Where Q is quantity demanded - p is price - a and b are parameters are coefficients that determine exact properties of demand curve o a > 0 and = Qd if p = 0 o b < 0 and = change in Qd if p increases by 1 unit (eg 1 dollar) -

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