S1 - regression analysis

Question 1

what is regression analysis

Answer 1

Assumes manager known demand
Info on demand function comes from published studies, hire consultant, or regression analysis
Y = a + bx + e
Will be discrepancy between actual points and the line

Question 2

what is least squares regression

Answer 2

Y = a* + bx
a and b* represent values of a and b that result in the smallest sum of squared errors between a line and actual data
Q = intercept - price

Question 3

how do you evaluate statistical significance

Answer 3

the true line may be different. How to ensure slope is non zero?
T statistics - when t>2 we are 95% confident the true parameter is not zero
P value - p<0.05, significant at 5% we are 95% confident that coefficient is not zero

Question 4

how do you evaluate overall regression line fit

Answer 4

r square - proportion of variation in dependent variable that is explained by the regression - 0 to 1
F statistic - assesses if the model has significant explanatory power - when <0.05, significant at 5%

Question 5

what is regression for non linear and multiple regression

Answer 5

non linear - lnQ = B0 + BplnP + e
Multiple regression - lnQxd = B0 + BxlnPx + BmlnM + BhlnPh + e