Why Can It Be Difficult to Interpret a Correlation Between

question 7

Multiple Choice

Why can it be difficult to interpret a correlation between two variables?

• A) Correlation does not establish a relationship.
• B) A correlation does not establish causation.
• C) Most correlations are illusory.
• D) Most correlations are negative.

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Definitions:

Elasticity Value

A measure in economics indicating how the quantity demanded or supplied of a good responds to changes in price or income.

Inelastic Demand

A situation in which the quantity demanded of a good or service changes by a relatively small amount in response to a change in its price.

Price Elasticity

An indicator of the extent to which the demand for a product is affected by variations in its cost.

Midpoint Formula

A method for calculating the price elasticity of demand or supply by averaging the starting and ending prices and quantities to estimate the percentage change.