Question

Example 1: Microeconomics example Economic theory Example: Law of demand If price increases, then quantity demanded (quantity sold) decreases Independent variable = price = X Dependent variable = quantity demanded = Y Y = β1 + β2f(X) + Ɛ (equation 2) [If β1 = Ɛ = 0 and β2 = 1, then we have Y = f(X)]

Question # 1: Do you expect β2 to be positive or negative in this microeconomics example? Explain.

Example 2: Educational administration theory GRADE = β1 + β2SKIP + Ɛ (equation 3) β2 is expected to be negative in this educational administration example SKIP = 1) Not doing reading assignments in the textbook 2) Not viewing videos posted by the professor 3) Not completing assignments such as hands-on econometrics with Stata GRADE = final course grade

Question # 2: What is the dependent variable? What is the independent variable?

Question # 3: Write a grammatically correct English sentence describing the equation of the educational administration theory.

Answer 1

Question 1.

The B2 is supposed to be negative here as when the price increases, demand decreases, and vice-versa. These variables are negatively correlated.

Question 2.

Here, the dependent variable is the final course grade whereas the independent variables are not doing reading assignments in the textbook, Not viewing videos posted by the professor, Not completing assignments such as hands-on econometrics.

Question 3.

The theory states that completing assignments, reading assignments and viewing videos posted by the professor helps a student to get a good final year grade. If he doesn't do that, then it is going to decrease as the final grade is dependent on these three variables.