Homoscedasticity and heteroscedasticity, Econometrics

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Probelm:

(a) Differentiate between homoscedasticity and heteroscedasticity.

(b) Outline the reasons why the variances of disturbance term may vary.

(c) Given the 3 observations (1,4) , (2,6) and (3,7), with the true model being 

Y = β1 + β2 X + u, solve the fitted line.


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