CHAPTER 3

Multiple Regression

In the last chapter, we saw how to construct a simple regression model. Simple regression described the linear relationship between one dependent variable and a single independent variable. However, in most business situations it takes more than a single independent variable to explain the behavior of the dependent variable. For example, a model to explain company sales might need to include advertising levels, prices, competitor actions, and perhaps many more factors. This example of using various independent variables—like advertising, price, and others—is a good mental model to use when thinking about multiple regression.

When we wish to use more than one independent variable in our regression model, it is called ...

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