The following simple model is used to determine the annual savings of an individual on the basis of his annual income and education savings = 0 + 0educ + 1inc + u,

where the variable educ takes value of 1 if the person is educated and the variable inc measures the income of individual.

Refer to the model above. The inclusion of another binary independent variable in this model that takes a value of 1 if a person is uneducated, will give rise to the problem of .

(a) omitted variable bias. (b) self-selection.

(c) perfect collinearity (d) heteroskedastcity.