Hwk 1 - Fall 2010

Hwk 1 - Fall 2010 - about the factors that affect the...

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Economics 230 Homework - 1 Z.Mukherjee Fall 2010 1. (a) Suppose that a random variable X takes the following values: -2, 0, 1, 3, 8 with the corresponding probabilities: 0.2, p, 0.1, 2p, 0.4. Calculate the expected value of X. (b) As you can see, the random variable X is a discrete random variable. If instead, you were asked to calculate the expected value of a continuous random variable, how would you do that? 2. Suppose next summer you will get a government job at Washington D.C. Your first assignment at your new job will require you to estimate the U.S. demand for cigarettes. You know from your principles of econ class that a consumer’s demand for any good depends on a number of factors. (a) Use your knowledge of basic microeconomics to come up with a model that you will estimate if you want to know about U.S. consumers’ demand for cigarettes. Write down your model and explain clearly what each term in the model implies. You must explain what variables you can observe (and can get data on) and what you plan to do
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Unformatted text preview: about the factors that affect the demand for cigarettes, but are either unobservable to the researcher or you cannot get the relevant data. (b) Suppose you actually had to run the regression and report the results to your boss. Explain in a few sentences how you would go about the job. What assumptions do you need to make about the unobservable factors such that your estimation results are meaningful and that the estimated coefficients show a casual effect of your exogenous variables on the dependent variable? 3. Suppose that at a large university, college grade point average, GPA, and SAT score, are related by the conditional expectation E(GPA|SAT) = 0.70+0.002 SAT. (a) What is the function E(GPA|SAT) = 0.70+0.002 SAT called if GPA is your dependent variable and SAT is your independent variable? (b) Find the expected GPA when SAT = 800. (c) Find E(GPA|SAT) = 0.70+0.002 SAT when SAT = 1100. (d) How would you interpret the difference in the results you obtained in (b) and (c)?...
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