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Unformatted text preview: 1. The following is a fictional joint probability distribution for the years of education an individual possess and their income. Notice that 12 years of education corresponds to graduating from high school, 16 to graduating from college and 20 to having an advanced degree. Years Education/Income $ 30,000 $ 60,000 $ 90,000 12 years 0.05 16 years 0.2 0.4 20 years 0.35 (a) What is the probability of having 12 years of education? What is the probability of having 16 years of education? What is the probability of having 20 years of education? (b) What is the probability of earning $ 30,000 conditional on having 12 years of education? (c) What is the probability of earning $ 60,000 conditional on having 16 years of education? What is the probability of earning $ 90,000 conditional on having 16 years of education? (d) Compare you answers to (b) and (c). Does it increase you earnings to obtain 16 years of education instead of 12? (e) What is the covariance between years of education and income? What does your answer suggest about how income relates to years of education?...
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This note was uploaded on 11/30/2010 for the course ECON 120A 1684210 taught by Professor Elliot during the Spring '10 term at UCSD.
 Spring '10
 Elliot

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