# marriottschool.netempPJBManEc300Econometrics.ppt by yurtgc548

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```									Econometrics:
The empirical branch of economics which utilizes
math and statistics tools to test hypotheses.
Special courses are taught in econometrics, which
present in detail the manner in which hypotheses
are developed and tested.
Some texts in Managerial Economics explore
basic econometrics techniques to show how the
firm could estimate its demand curve. Rather than
take time to do this, we look merely at the
intuition.
Regression Analysis:
Quantitatively measures relationships between
two (or more) variables.

Scatter Diagram
C
•• • •
• • •
• • • •• • •
•    • •• • •
• • • ••
C58
• ••

0                         I
I179
Econometrics:
We use econometrics to determine a and b, to get
a regression equation, i.e., to estimate a curve that
best represents scatter diagram data, and to show
how well it represents the data.
C
•• • •
• • •
• • • •• • •           R2, the “coefficient
•    • •• • •             of determination,”
• • • ••
• ••                        does this.
Line of “best fit”
0                            I
Econometrics:
R2 indicates the percentage of variance in the
dependent variable that can be accounted for by
variations in the independent variable.

•         •
•      • • ••
• •• • • • • •
•
•
• •• • •          •
• •       ••
•        •
Econometrics:

y=a+bx
•

(x,y)       •
•            Regression calculates
•           •
v{        }v              y=a+bx such that 3v2 is a
•
•                        minimum. No other line
has 3v2 as low.

```
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