Econometric consumption demand analysis – multiple linear regressions

Abstract

Econometric consumption demand analysis comprises a sphere of applied econometrics that expresses the 
maximum connectivity between the economic theory (consumption demand theory) on one side, and 
mathematics and statistics on the other, which yields in rather significant results for applied econometrics, 
through the use of respective methods and models.  
The two-dimensional regression method is based on the Alfred Marshall and Ernest Engel models respectively, 
and represents the basis of the statistics-econometric models used for empirical analyses of consumption 
demand. In addition to the linear regression, the multiple linear regressions play a significant role in the 
econometrical analysis of consumption demand, respectively on the determination of the demand for concrete 
products and assumption of the trends of such demand for the upcoming years.  
Consumption demand analyses may be expressed through linear and non-linear functions. Below, we have 
strived to transform the non-linear functions into linear functions, by utilizing adequate transformation methods, 
mostly logarithmic. The utilization of linear functions facilitates the calculation of the model’s parameters, 
assumptions and economic interpretation of the consumption demand. If the use of these three very significant 
demand analysis elements was correct, this means that we have accomplished the three basic scientific 
purposes of econometrics: a) determination of the adequate demand model, b) calculation of demand model 
parameters, c) assumption of the consumption demand for concrete products.