5.2 Where’s Your Variation?

Avocado Prices Overview

The graph below depicts weekly Avocado sales quantities in California from 1/2015 - 3/2018

• What can we infer from the above relationship?
  
• What research questions might we produce from this chart?
  
• Can we answer our research questions using the chart?

Example Answers to Above Questions

What can we conclude from the above chart?

Conclude

• Negative statistical relationship between avocado prices and quantity sold
• Nothing else.

Cannot conclude

• Increase in avocado price caused lower sales
  
• How supply and demand interact to influence price

Example research questions

• What is effect of price increase on avocados demanded?
  
• How does number of avocados brought to market influence price charged?
• Effect of price on number of avocados brought to market?
• Temporal effect of quantity demanded from prior week on subsequent week

Can we answer research questions based on data in graph?

No

DGP and Isolating Variation in Avocados Example

Broad ideas

• How can we find variation in data that answers our question?
  
• What is the variation that we want to find? Assume we want to determine effect of price on demand for avocados
  
• Need to have some knowledge about DGP to address these questions

Avocado DGP

• Assume avocado suppliers set plan for weekly avocado prices at beginning of each month
  
• Explanations due to suppliers setting prices or quantities only matter between months
  
• Using this information, we can isolate variation due to consumers only.

Within Month Avocado Example