You Explain to Your Friend Haslina,who Runs a Catering Service

question 193

Multiple Choice

You explain to your friend Haslina,who runs a catering service called "Meals in a Zip," about an economic theory which asserts that consumers will purchase less of a product at higher prices than they will at lower prices.She contends that the theory is incorrect because over the past two years she has raised the price of her catered meals and yet has seen a brisk increase in sales.How would you respond to Haslina?

• A)Haslina is right; she has evidence to back her claim.The theory must be erroneous.
• B)I will explain to her that she is making the error of reverse causality: it is the increase in demand that has enabled her to raise her prices.
• C)I will explain to her that there are some omitted variables that have contributed to an increase in her sales such as changes in income.
• D)Haslina is making the mistake of assuming that correlation implies causation.

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Definitions:

Tailor Instruments

The process of customizing assessment tools or methods to suit the specific needs or requirements of an individual or situation.

WISV-IV

Refers to the Wechsler Intelligence Scale for Children - Fourth Edition, a test designed to measure a child's intellectual ability.

Confidence Intervals

A statistical range, with a given probability, that is likely to contain the true value of an unknown population parameter.

Measurement Error

The discrepancy between the true value and the observed value due to inaccuracies in data collection or instrumentation.