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Charlotte D.
Experienced Economist and Statistician
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Economics
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Question:

What is the elasticity of demand?

Charlotte D.

Elasticity of demand measures the effect of a change in price in the change of quantity demanded. Essentially, it is a measure of the responsiveness of consumers to changes in price. Markets with very elastic demand have a high response to price changes. Markets with very inelastic demand have little response to price changes. For example, the market for gasoline has a very inelastic demand; when the price of gas goes up, the overall quantity demanded does not go down by much because people have a certain amount of gas that they need to use and it is difficult to make a large change in that quantity.

Statistics
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Question:

What is the difference between the "between groups variance" and the "within groups variance" in ANOVA?

Charlotte D.

ANOVA is the best way to compare groups of observations to see if there is a difference in the means of the groups. In order to figure that out, you need to calculate both the "between groups variance" and the "within groups variance". The best way to remember this is to picture the observations as points inside circles, and the groups as those circles. Between-groups variance is what you get when you ignore the insides of the circles and simply focus on how different the circles are from each other. All you have to do is compare the mean of each group to the grand mean (or mean-of-means). Within-groups variance is what you get when you compare the points inside each circle to the circle. You are comparing the observations only to the other observations in the same group.

Accounting
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Question:

How can I remember whether the normal balance of an account is a debit or a credit?

Charlotte D.

It's helpful to go back to the accounting equation: A=L+E (assets = liabilities + equity). Look at which side of the equation the account falls on, and that is the "side" the normal balance falls on. So asset accounts have a normal debit balance because the A is on the left side of the equation and debits are always recorded on the left. Similarly, liability accounts are on the right side of the equation, so they have a normal credit balance, since credits are always on the right.

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