In Determining the Causal Effect of Price on Sales, If

Multiple Choice

In determining the causal effect of Price on Sales, if advertising spend is a good control variable, how will the correlation of the error terms from the regression, Sales_i = β₀ + β₁Price_i + U_i, and Sales_i = α₀ + α₁Price_i + α₂Advertising_i + V_i and price be related?

A) Cor(U_i, V_i) = 0
B) Cor(U_i, Price_i) = 0, Cor(Price_i, V_i) = 0
C) Cor(U_i, Price_i) ≠ 0, Cor(Price_i, V_i) = 0
D) Cor(U_i, Price_i) = 0, Cor(Price_i, V_i) ≠ 0