Your Textbook Discussed the Regression Model When X Is a Binary

question 6

Essay

Your textbook discussed the regression model when X is a binary variable
Yi = β0 + β1Di + ui,i = 1... ,n
Let Y represent wages,and let D be one for females,and 0 for males.Using the OLS formula for the slope coefficient,prove that is the difference between the average wage for males and the average wage for females.

---

Definitions:

Fixed Cost

Expenses that do not change in proportion to the level of goods or services produced by a business.

Contribution Format

An income statement format that separates fixed and variable costs and expenses, used to determine contribution margin.

Least-squares Method

A statistical technique used to determine the line of best fit by minimizing the sum of the squares of the differences between the observed values and the values predicted by the line.

Mixed Cost

Expenses that have both fixed and variable components, changing with levels of production but not in direct proportion.