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AAEC 4302

STATISTICAL METHODS IN AGRICULTURAL RESEARCH

Chapter 1.

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Introduction

• Econometrics involves special statistical methods that are most suitable for analyzing economic data/relations

• Linear regression is a primary tool for empirical economic and biological analyses

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• The first step in a linear regression analysis is to state a behavioral relation based on economic or biological theories or plain reasoning

• The second step is to state this relation as an equation

Linear Regression Analysisp 2

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Example of a Linear Regression Model

• u is the error term takes into account other factors that affect the dependent variable Y, such as: Individually unimportant variables Error in the measurement of Y Pure chance

Identity vs. behavioral equation

The model is an abstraction from reality

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Brief Review of Functions and Graphs

Many functions are not straight lines

Their slope can be viewed as the slope of the straight line drawn tangent to the curve at that point

Slope is interpreted as the ratio of the change in Y to a change in X that results from moving along the curve just a small distance from the original point

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A Brief Review of Elasticity

• Elasticity =

• A linear function has a constant slope, but its elasticity varies throughout the function

• The slope and the elasticity change along a non-linear function

Y

Xslope