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An economist has data on the occupation, this year's income (denoted $y$ ) and this year's consumption (denoted $c$ ) of a sample of 26-year-olds. Within this sample, some are top professional athletes and others are medical doctors in their first year of residence. [Make whatever assumptions you think are reasonable and, if you wish, refer back to Exercise 6.1](a) Suppose one computed $s=\frac{y-c}{y}$ for each individual in the sample. Should we expect $s$ to be higher for athletes or doctors?(b) Suppose interest rates go down. How should we expect the response of $s$ to differ between the two groups?
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Step 1
- \( s \) is defined as the savings rate for each individual, calculated by the formula \( s = \frac{y - c}{y} \), where \( y \) is the income and \( c \) is the consumption. Show more…
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Linear and Quadratic Functions
Building Quadratic Models from Verbal Descriptions and from Data
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