Homework discussion post (300 word min) | ECO 342 Principles of Econometrics | Ashford University – Essaylink

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The Assignment:

Based on cause and effect, explain the relationship between an independent and a dependent variable.

Respond to at least two of your classmates’ postings.

Tips & Hints:

Please note that it is not sufficient to simply say that one is cause and the other is effect… because a) this just repeats the question, and b) statistics and econometrics does NOT really establish cause and effect!  (So you know what not to say as an answer!)

Be sure to read what the text has to say.  While it is true that one hopes that there is cause and effect, neither statistics nor econometrics can tell you whether a cause will with certainty result in an effect.  (How could simple math establish cause and effect?) So what exactly is the relationship between independent and dependent variables in statistics and econometrics?

It may help you to address this question by pondering an example. (This is intended as a thought experiment, not as something to answer in this question.)  Imagine that you were asked to forecast OLED TV unit sales for 2020.  Your dependent variable would be the number of OLED TVs to be sold next year; your independent variables might be consumer disposable income, the price of OLED TVs to the consumer, and industry capacity.  Does that mean that that industry capacity would cause sales of OLEDs?  Does that mean that consumer disposable income causes sales of OLEDs?  How could these factors suddenly actually cause you or me to run out and buy an OLED TV?  Of course they can’t! 

But there is some kind of relationship.  The questions is what kind of relationship?  And that is what this Discussion asks you to consider.

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