Q1. Given y=b0+b1X+u, let y denote the quantity of production in kg.

per
hector. X denotes the quantity of seed per hectare. X denotes the quantity of
seed and u is the unobserved error
a) what kind of factor are contained in u? Are these factor likely to be correlated
with level of seed use? Explain
b) Will a simple regression analysis uncover the ceteris paribus effect of seed use on
rice yield? Explain

a) What kind of factor are contained in u? Are these factor likely to be

correlated with level of seed use? Explain

The unobserved error term, u, in the regression equation y = b0 + b1x + u, represents

all the factors that affect rice yield other than the quantity of seed used. These factors
could include:

The quality of the seed

The amount of fertilizer used
The amount of water used
The weather conditions
The pests and diseases that affect the crop
The level of management practices used
It is possible that some of these factors are correlated with the level of seed use. For
example, farmers who use high-quality seed may also be more likely to use other
good management practices. As a result, the simple regression analysis may
underestimate the true effect of seed use on rice yield.
b) Will a simple regression analysis uncover the ceteris paribus effect of seed
use on rice yield? Explain

A simple regression analysis will uncover the ceteris paribus effect of seed use on
rice yield if all the other factors that affect rice yield are held constant. However, in
the real world, it is impossible to hold all these factors constant. As a result, the
simple regression analysis will only provide an estimate of the effect of seed use on
rice yield, and this estimate may be biased.
To get a more accurate estimate of the effect of seed use on rice yield, it is necessary
to control for the other factors that affect rice yield. This can be done by using a
multiple regression analysis, which takes into account the effects of multiple
independent variables.
Here is an example of a multiple regression equation that could be used to estimate
the effect of seed use on rice yield:

y = b0 + b1x1 + b2x2 + b3x3 + u

where:

 y is the quantity of rice yield

 x1 is the quantity of seed used
 x2 is the quality of the seed
 x3 is the amount of fertilizer used
 u is the unobserved error term
The coefficients b1, b2, and b3 can be estimated using a multiple regression analysis.
These coefficients will tell us how much rice yield changes in response to a one-unit
change in each of the independent variables, holding the other independent variables
constant.
In conclusion, a simple regression analysis will not uncover the ceteris paribus effect
of seed use on rice yield. To get a more accurate estimate of this effect, it is necessary
to control for the other factors that affect rice yield. This can be done by using a
multiple regression analysis.
Q2. Given that an estimated regression function to analyse the impact of
fertilizer use (kg/ha) on Tomato production (ton?ha) is as follow
Tomato= 1.12+0.056 fertilizer

a) What is the predicted productivity when there is no fertilizer used and when 130
kg per ha is used
b) does this simple necessarly capture a causal relationship between the fertilizer use
and tomato productivity? Explain

a) The estimated regression function given is:

Tomato = 1.12 + 0.056 * fertilizer
To predict the productivity when there is no fertilizer used (fertilizer = 0 kg/ha):
Tomato = 1.12 + 0.056 * 0
Tomato = 1.12

So, the predicted productivity when no fertilizer is used is approximately 1.12

ton/ha.

To predict the productivity when 130 kg per hectare is used (fertilizer = 130 kg/ha):
Tomato = 1.12 + 0.056 * 130
Tomato = 1.12 + 7.28
Tomato = 8.40
So, the predicted productivity when 130 kg per hectare of fertilizer is used is
approximately 8.40 tons/ha.
b) No, this simple regression does not necessarily capture a causal relationship
between fertilizer use and tomato productivity. While the regression provides an
association between the two variables, it does not establish causation. Several factors
need to be considered to infer causation:

1. Direction of Causation: Does fertilizer use cause an increase in tomato

productivity, or could it be the other way around? It's possible that higher
tomato productivity leads to increased fertilizer use (reverse causation) or that
there's a third factor affecting both variables (confounding).
2. Omitted Variables: The model does not account for other factors that can
affect tomato productivity, such as weather conditions, soil quality, pest
management, irrigation, etc. These omitted variables could be driving the
observed relationship
3. Endogeneity: If there's a bidirectional relationship between fertilizer use and
tomato productivity (e.g., productive crops lead to more fertilizer application),
endogeneity issues might arise, and the regression may not accurately capture
the causal effect.
4. Experimentation: Establishing causation often requires controlled
experiments or sophisticated research designs that can isolate the impact of
one variable while holding others constant.
In summary, while the regression provides an association between fertilizer use and
tomato productivity, more rigorous analysis and considerations are needed to
establish a causal relationship. Correlation in this context does not imply causation,
and additional evidence and methods are necessary to make causal claims.