CHAPTER 8

An Introduction to Regression Analysis

Until this point, with the exception of the covariance and correlation coefficient, the focus has been on a single variable. Most economic concepts are complex and studying them requires considering other economic, social, cultural, and political factors. Even the simplest economic concepts such as quantity demanded have at least two variables, a quantity and a price. To estimate or forecast income, it is necessary to decide whether the orientation of the study is macro- or microeconomics. At the microeconomic level, income depends on acquired human capital, natural ability, talent, work ethic, exertion, years of experience, and seniority, to name a few. Some seemingly unrelated factors such as ...

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