Topic02%28b%29_Elasticity

# An ordinary least squares method makes the sum of

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An “ordinary least squares” method makes the sum of squared residuals as small as possible. This is normally done using computer programs such as Excel. 28

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R i U i E l Regression Using Excel Carry out the following steps Carry out the following steps. 1. Put the Cod data in an Excel spreadsheet. Put Quantity in column A and Price in Put Quantity in column A and Price in Column B. 2 Select the two columns of data 2. Select the two columns of data. 3. Click on <Insert>, <Scatter>, and select the first type of scatter plot. You should see a first type of scatter plot. You should see a scatter plot like Figure 3.3. 29
R i U i E l Regression Using Excel 4 Click on Layout then Trendline and select 4. Click on Layout, then Trendline and select Linear Trendline. The estimated demand curve will appear. 5. Right Click on the line and then Format Trendline. Select Display Equation, and Display R-squared. 6. Click on and then delete the legend that appears at the right. 7. Excel uses Ordinary Least Squares R i hi li Regression to get this line. 30

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