what is an error term 
an error term is a residual variable produced by a statistical or mathematical model which is created when the model does not fully represent the actual relationship between the independent variables and the dependent variables as a result of this incomplete relationship the error term is the amount at which the equation may differ during empirical analysis the error term is also known as the residual disturbance or remainder term and is variously represented in models by the letters e or u understanding an error terman error term represents the margin of error within a statistical model it refers to the sum of the deviations within the regression line which provides an explanation for the difference between the theoretical value of the model and the actual observed results the regression line is used as a point of analysis when attempting to determine the correlation between one independent variable and one dependent variable error term use in a formulaan error term essentially means that the model is not completely accurate and results in differing results during real world applications for example assume there is a multiple linear regression function that takes the following form y x where constant parametersx independent variables error term begin aligned y alpha x beta rho epsilon textbf where alpha beta text constant parameters x rho text independent variables epsilon text error term end aligned y x where constant parametersx independent variables error term 