Question

State whether each of the following characteristics is a signal or an index. a. Ethnicity b....

  • State whether each of the following characteristics is a signal or an index.

  • a. Ethnicity

  • b. Economics Degree

  • c. Wearing a tie to an interview

  • d. Height

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Answer #1

Signals are the economic variables that conveys some valuable information about an individual or some group of people while index measures the change in particular data's over time or allows us to make comparisons between various groups or individuals.

A. Ethnicity :- measures the different categories to which different people belonging to different caste, age, tradition, culture etc belong to. It is hence considered as an index.

B. Economics degree :- a person with an economics degree signals the level of education a person has acquired. Hence it is considered as an economic signal.

C. Wearing a tie to an interview :- wearing a tie to an interview shows the personality of an individual. Hence it is also considered as a signal.

D. Height :- Height is considered as an index as it is calculated to determine the well being of a person and it keeps changing over time.

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