The most compelling challenge faced by management is the accurate estimation of demand, cost, and profit relations. Not only must the range of important factors that affect demand, costs, and profits be determined, but the relative magnitude of each influence must also be assessed. Regression analysis is a powerful and extremely useful statistical technique that describes the way in which one important economic variable is related to one or more other economic variables. Although there are clear limitations to the technique, regression analysis is often used to provide successful managers with valuable insight concerning a variety of significant economic relations. Given the widespread success of regression analysis in real-world applications, it is well worth gaining a careful understanding of the technique.
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