In Estimating the Causal Relationship Between Sales and Price in the Following

question 43

Multiple Choice

In estimating the causal relationship between Sales and Price in the following determining function Sales_i = β₀ + β₁Price_i + U_i, what assumption in addition to E [U_i ] = 0, justifies that the estimated coefficient on Price can be interpreted as an estimate of the causal effect of Price on Sales?

• A) E [Price_iU_i ] = 0
• B) E [Sales_iU_i ] = 0
• C) E [Price_iU_i ] = β₀
• D) E [Price_iU_i ] = β₁

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Definitions:

Standard Deviation

A parameter that indicates the level of dispersion or variability within a collection of data points.

Data

Factual information, especially measurements or research results, used as a basis for reasoning, discussion, or calculation.

Standard Deviation

An indicator that quantifies the extent of spread or deviation of a collection of values from their average.

Data

Information collected for reference or analysis, which can be qualitative or quantitative in nature.