Question

In: Economics

Consider the data provided in the table below, which shows years of education and income for...

Consider the data provided in the table below, which shows years of education and income for ten individuals.

Education Income(1) Income(2)
10 15,000 15
12 20,000 20
12 35,000 35
12 40,000 40
12 60,000 60
16 50,000 50
16 60,000 60
16 70,000 70
18 60,000 60
21 80,000 80

A) Calculate the covariance and correlation of education and income, using the “Income1” column for income, which is measured in dollars.

B) Calculate the covariance and correlation of education and income, this time using the “Income2” column for income, which is measured in thousands of dollars.

C) Based on what you have done, discuss the merits of using covariance and correlation to measure the relationship between two variables.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
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