Question

Provide your own example of cause-effect relationship of any two variables. Also define what the independent (and dependent) variable is in your statement(s). Keep in mind that the independent variable should be the cause and dependent variable must be the effect.

Name of an independent variable: ________________________________________

Name of a dependent variable: ____________________________________

Now show the functional representation of your model.

(EXAMPLE) C = f(Y): ___Consumption is a function of Income or Consumption = f (Income)

Or, Wage is a function of Education: Wage = f (education)

Answer 1

Independent variable refers to variables which are explanatory variables in a regression model and explains the dependent variable.

Dependent variable refers to variables which are explained in terms of explanatory variables.

One example is consumption function; where consumption is dependent variable and income is independent variables which explains consumption levels depending on different levels of income.

Another example is wage as a function of education where education levels determines the amount of wage to different workers. It is an independent variable.