Your friend gives you the data from a day of taco sales at each of the 40 food trucks, and asks you to estimate a demand curve. They let each taco truck driver set their own price, so there's lots of variance in prices. Qi =B0 +B1 Pi +ui j=1to40. You look at the data and discover that the correlation of Q and P is positive in this sample. Your friend laughs at you, --they learned in high school that demand curves slope downwards Explain how a positive correlation of Q and P might happen, by describing at least one real life omitted variable that might result in a positive correlation, and using the terms linear causal effect and the omitted variable bias formula

Your friend gives you the data from a day of taco sales at each of the 40 food trucks, and asks you to estimate a demand curve. They let each taco truck driver set their own price, so there's lots of variance in prices. Qi =B0 +B1 Pi +ui j=1to40. You look at the data and discover that the correlation of Q and P is positive in this sample. Your friend laughs at you, --they learned in high school that demand curves slope downwards Explain how a positive correlation of Q and P might happen, by describing at least one real life omitted variable that might result in a positive correlation, and using the terms linear causal effect and the omitted variable bias formula

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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