The simple linear regression model consists of the mean function and the variance function. SLR, mean function E(Y|X=x) = β0 + β1x The value of parameters are usually unknown and must be estimated using data. SLR, variance function Var(Y|X=x) = σ2 In SLR, the variance function is assumed to be constant, with a positive value of σ2 that is usually unknown. yi is observed value of i the response y, and will typically not equal its expected value E(Y|X=xi) because σ2 > 0. yi = E(Y|X=x) + ei, where ei is statistical error (implicit equation for ei) ei can be defined explicitly as, ei = yi - E(Y|X=x) = yi - (β0 + β1x) The errors, ei, depend on the unknown parameters in the mean function and so are not observable quantities. They are random variables. Assumption of ei, E(ei|xi) = 0 (mean of statistical errors is 0). So, if you draw a scatterplot of the ei vs the xi, we would have a null scatterplot, with no patterns. Assumption of ei, they are independent. Assumption of ei, expected t