Interactive Glossary

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Parameter:

In characterizing a functional relationship between independent variables and a dependent variable, when the relationship is quantified, the resulting coefficients are parameters. If precise values are not known, then letters may be assigned to coefficients. For example, for the demand equation, P=A-bQ (where P=price and Q=quantity demanded), the parameters are A and -b. An empirical study might provide estimates of the two coefficients.

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