S 2

a) Within regression analysis it is of vital importance to apply the most relevant functional form. Explain and reflect upon the choice of functional form and why it is so important. b) Give three examples of how to develop the simplest form of a linear regression function such as Y,- = [5'0 + 31X\"- + 31X\"- + 32X2i + + ul- to better fit a given research question and data. In other words, exemplify with three different functional forms and to what data and questions these are suggested