2.77 Education and income

There is a strong positive correlation between years of education and income for economists employed by business firms. In particular, economists with a doctorate earn more than economists with only a bachelor’s degree. There is also a strong positive correlation between years of education and income for economists employed by colleges and universities. But when all economists are considered, there is a negative correlation between education and income. The explanation for this is that business pays high salaries and employs mostly economists with bachelor’s degrees, while colleges pay lower salaries and employ mostly economists with doctorates. Sketch a scatterplot with two groups of cases (business and academic) illustrating how a strong positive correlation within each group and a negative overall correlation can occur together.