ECON 101 Lecture Notes - Lecture 9: De-Ice, Scatter Plot, Dependent And Independent Variables
Document Summary
It is simple to infer that a causal relationship occurs from a scatter diagram that shows two variables moving either positively or negatively in relation to each other. But relationships are not necessarily attributable to direct cause and effect between two variables. Very probably an observed interaction between two variables is due to the non- observed influence on one of the other two variables of a third variable. A non-observed variable that produces the erroneous appearance of a direct causal relationship between certain variables through its effect on other variables is called an omitted variable. In new england, for example, a larger amount of snowfall would usually lead people to buy more snow shovels within a given week. It also would encourage people to buy more de-icer fluid. However, it is incorrect to assert a causal relationship between these two.
