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1. Jul 2019
2. www.econometrics-with-r.org www.econometrics-with-r.org
1. In a simple linear regression model, we model the relationship between both variables by a straight line, formally

It would be better to start in the following way: "To build simple linear regression model, we hypothesize that the relationship between dependent and independent variable is linear, formally:"

By saying that, In a simple linear regression model, we model the relationship between both variables by straight line is strictly speaking wrong. Strictly speaking, by straight line we model the relationship between regressors the expected value of the dependent variable given the value of the regressors.

Then later, you point out that the relationship is not exact because not all points fall on the straight line and because of that you come up with an error terms and you continue in this way util you arrive to the final formulation of the Simple Linear Regression Model. (Which you do well later).