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LECTURE 10
4TH STAGE OF QUANTITATIVE ANALYSIS: ANALYZING DATA

Simple Regression to Multiple Regression Analysis:
Introductory Material (Estimating and Evaluating the Estimated Model)

PART – I: Simple/two-variable regression analysis
Simple regression analysis: an example
Assuming a survey of 10 families yields the following data on their consumption expenditure (Y) and income (X).
Y (Thousands) X (Thousands) 70 80 65 100 90 120 95 140 110 160 115 180 120 200 140 220 155 240 150 260

The theory suggests that consumption (Y) depends on income (X); hence, econometric model may be specified, as follows. Y = f(X) (General form) (1)
Or Y = β0 + β1X + e (Linear form) (2) The above stated regression analysis model contains two variables (one independent variable X and one dependent variable Y); this model is therefore called Two-variables or Simple regression analysis model.

Is this type of Simple or Two-variable model justified? We will discuss this question later on; let’s first estimate this model, using the Statistical Package for Social Sciences’ software SPSS.

The estimated model & interpretation

Y = 24.4530 + 0.5091 X (6.4140) (0.0357) (Standard Error) (3.8124) (14.2445) (t-statistic) (0.005) (0.000) (p-value/sig. level) (3)