Eco 440 Assignment 2 1. Following the last assignment, the following shows a scatterplot of "experience" against "education" with a regression line superimposed. We assume the following relationship between the two variables: experience; = Bo + Bjeducation; + €;, where e; * N(0, o2). Scaterpiot of eperience versus education with regression line supetimposed Education (1) What is the independent variable? What does the independent variable correspond to in the graph? What is the dependent variable? What does the dependent variable correspond to in the graph? (2) What are Bo and 31? What do Bo and B1 correspond to in the graph? (Hint: Do we know Bo and B1?) Denote Bo and B1 as our ordinary least squares (OLS) estimates of Bo and B1. What do Bo and B1 correspond to in the graph? What are the relationships between Bo and Bo and that bewteen B1 and B1? Does Bo = Bo or B1 = B1? Are there any methods other than OLS we can use to estimate Bo and B1? Will all the methods produce the same estimates of Bo and 3?

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