Explain why correlation does not always imply causation. Does causation always imply positive correlation? Explain your answer

What will be an ideal response?


Correlation means that there is a relationship between two variables; as one variable changes, another variable changes. Causation occurs when one variable directly affects another through a cause-and-effect relationship. Correlation suggests that there is some kind of connection, but not necessarily a cause and an effect. For example, number of storks in a region might be correlated with the number of babies born in the region. But this doesn't mean that storks bring babies.
Positive correlation implies that two variables tend to move in the same direction. However, causation need not only imply positive correlation. For example, an increase in the price of bacon may cause people to buy smaller amounts of bacon. In this example, the price of bacon and the quantity of bacon purchased will show a negative correlation.

Economics

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What will be an ideal response?

Economics

Which of these is an example of a negative network externality?

A) Bandwagon effect B) Pollution C) Snob effect D) Two-part tariff

Economics

Exhibit 14A-1 Aggregate demand and supply model Based on Exhibit 14A-1, when the aggregate demand curve shifts to the position AD2 and the economy is operating at point E2, the economy's position of long-run equilibrium corresponds to point: 

A. E1. B. E2. C. E3. D. E1 or E3.

Economics

Suppose the annual inflation rate is 10%, and an asset bought at the beginning of the year for $100,000 is sold for $115,000. If the capital-gains tax rate is 30%, what is the (approximate) effective tax rate on the sale of this asset?

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Economics