EXERCISE 1 - ANSWER

What is the correlation between where a person lives, their income, and their associated total monthly household food expenditure?

Although there are three variables involved in this correlation analysis, you compute them in the same manner as if there were two variables.

corr metro incmon mxtfood

         |    metro   incmon  mxtfood
---------+---------------------------
   metro |   1.0000
  incmon |   0.3912   1.0000
 mxtfood |   0.1347   0.2252   1.0000

You still interpret the results the same way: where a person lives, their monthly income and their monthly food expenditure are all positively correlated. One of the most important things to take from this example is that all three variables are associtated in the same direction, but obviously not in the same causal order.