Answer to Question #217130 in Economics for abebde

Question

Q:What is the need for studying econometrics ? What procedures one follows in econometrics ? What is the difference between the population and sample regression functions? Is this a distinction without difference? What is the role of error term , ui in regression analysis? What is the difference between the error term and the residual, u ̂i?A:1st Question : • The importance of studying Econom...See solution

Answer 1

Econometrics is a science that has taken a place between economic theory, statistics, and mathematics. On the one hand, it studies economic processes (therefore, it relies on economic theory), on the other hand, it is designed to describe them with mathematical precision (in the form of mathematical models), and at the same time, it deals not with functional (unambiguously manifested) dependencies, but with stochastic (more likely of a probabilistic nature). Thus, we can say that econometrics seeks to describe the world in the form of mathematical models in the best possible approximation.