HOW DOES INFLATION AFFECT CONSUMERS PART V

REGRESSION ANALYSIS TERMINOLOGY STARTING WITH THE TERM REGRESSION ANALYSIS, IT IS A STATISTICAL PROCESS USED FOR FINDING OUT OR ESTIMATING THE RELATIONSHIP BETWEEN ONE OR MORE INDEPENDENT/PREDICTOR VARIABLES AND THE DEPENDENT/RESPONSE VARIABLE. INDEPENDENT/PREDICTOR VARIABLE THAT WE ARE TRYING TO PREDICT WHERE AS DEPENDENT/RESPONSE IS THE ONE THAT IS EFFECTING OR INDIRECTLY. MULTIPLE REGRESSION. 

ANALYSIS INVOLVES MULTIPLE VARIABLE WHICH IS SLIGHTLY ADVANCE IN TERMS OF CALCULATIONS AND DATA COLLECTIONS BUT IS CONSIDERED TO BE THE MOST ACCURATE FOR PREDICTIONS. ALL THE ESTIMATIONS ARE BASED ON THE PAST DATA AVAILABLE AND THE FACTORS THAT ARE INFLUENCING IT DIRECTLY OR INDIRECTLY. STEPS FOR REGRESSION ANALYSIS NOW LET’S GO OVER THE STEPS THAT ARE INVOLVED IN REGRESSION ANALYSIS METHOD ONE BY ONE. STEP 1 DETERMINING THE VARIABLES IS THE VERY FIRST STEP WHICH INVOLVES THE DETERMINATION OR RECOGNITION OF YOUR VARIABLES BASED ON WHICH THE FORECASTING WILL BE DONE.

LET’S CONSIDER AN EXAMPLE OF A COMMODITY AND STATE ITS VARIABLES IN TERMS OF ITS DEMAND FUNCTION BELOW REGRESSION ANALYSIS TERMINOLOGY STARTING WITH THE TERM REGRESSION ANALYSIS, IT IS A STATISTICAL PROCESS USED FOR FINDING OUT OR ESTIMATING THE RELATIONSHIP BETWEEN ONE OR MORE INDEPENDENT/PREDICTOR VARIABLES AND THE DEPENDENT/RESPONSE VARIABLE. INDEPENDENT/PREDICTOR VARIABLE THAT WE ARE TRYING TO PREDICT WHERE AS DEPENDENT/RESPONSE IS THE ONE THAT IS EFFECTING IT DIRECTLY OR INDIRECTLY. MULTIPLE REGRESSION ANALYSIS INVOLVES MULTIPLE VARIABLES WHICH IS SLIGHTLY ADVANCED IN TERMS OF CALCULATIONS AND DATA COLLECTIONS BUT IS CONSIDERED TO BE THE MOST ACCURATE FOR PREDICTIONS. ALL THE ESTIMATIONS ARE BASED ON THE PAST DATA AVAILABLE AND THE FACTORS THAT ARE INFLUENCING IT DIRECTLY OR INDIRECTLY. STEPS FOR REGRESSION ANALYSIS NOW LET’S GO OVER THE STEPS THAT ARE INVOLVED IN REGRESSION ANALYSIS METHOD ONE BY ONE.

STEP 1 DETERMINING THE VARIABLES IS THE VERY FIRST STEP WHICH INVOLVES THE DETERMINATION OR RECOGNITION OF YOUR VARIABLES BASED ON WHICH THE FORECASTING WILL BE DONE. LET’S CONSIDER AN EXAMPLE OF A COMMODITY A AND STATE ITS VARIABLES IN TERMS OF ITS DEMAND FUNCTION BELOW, ZDA = F(PZ, Y, A, PS, PC) WHERE, ZDA = DEMAND FOR COMMODITY A PRICE OF COMMODITY A (PZ) CONSUMER INCOME (Y) ADVERTISING EXPENDITURE INCURRED ON DEMAND THAT IS EXPLAINED LATER IN THE BELOW STEPS.

KNOWING HOW TO SELECT YOUR VARIABLES FOR THE DEMAND FUNCTION IS VERY IMPORTANT, THE VARIABLE THAT ARE TO BE SELECTED SHOULD HAVE A SIGNIFICANT IMPORTANCE ON THE DEMAND THAT COMMODITY AND WHEREAS THE USE OF TOO MANY VARIABLES AND UNIMPORTANT FACTORS SHOULD BE OVERLOOKED, BELOW IS AN EXAMPLE OF WHAT’S STATED ABOVE WHEN A CERTAIN BRAND OF CLOTHING IS PREDICTING THE DEMAND OF THEIR PRICED COMMODITY LIKE HOUSING IS CONSIDERED THEN FACTORS SUCH AS CREDIT ACCOUNTS AND INTEREST PLAY A VITAL ROLE. ADDING EXTRA VARIABLES THAT HAS NEGLIGIBLE AFFECT OR NO EFFECTS WILL MAKE YOUR ANALYSIS COMPLICATED AND TOO MUCH WORK SO IT’S KEPT SIMPLE.

STEP 2 PAST DATA COLLECTIONS ONCE YOU HAVE YOUR VARIABLES SET AND DETERMINED THE NEXT IMPORTANT STEP IN THE PROCESS IS THE COLLECTION OF THE PAST DATA. THE DATA THAT SHOULD BE GATHERED MUST BE WITH RESPECT TO THE VARIABLES THAT YOU HAVE DETERMINED OR SET. THE DATA COLLECTION CAN BE DONE IN TWO DIFFERENT REGIONS OF THE MARKET FOR A PARTICULAR TIME PERIOD. REMEMBER THAT FREQUENCY OF THE DATA COLLECTED CAN BE OF VARIOUS PERIODS SUCH AS FOR A MONTH, HALF A YEAR OR A YEAR OR SO, BUT THE REGULARITY OF THE FREQUENCY IS IMPORTANT AND IT SHOULD BE MAINTAINED, FOR EXAMPLE IF THE DATA COLLECTED IS FOR EVERY OTHER YEAR SO IT IS BEST TO KEEP ON COLLECTING THE DATA YEAR WISE AND NOT TO SHIP ANY YEAR.