Question

3. a) Consider the following model for the demand function: Where Q Quantity demanded P price e exponent, and U is the population error term i) Name at least one additional independent variable which may influence a. i) Linearize the above model by taking logs. b) Consider the following reciprocal regression model (sample): Y = b1 + b2(1/%) + ei 2 where bi and b2 are positive. i) What happens to Y as X increases? Show the relationship between Y and X in a i) Give an economic example of the above model. c) Consider the following reciprocal regression model (sample): Y b1 b2 (1/x)e where bi and b2 are positive. i) What happens to Y as X increases? Show the relationship between Y and X in a diagram diagram with Y on the vertical axis and X on the horizontal axis with Y on the vertical axis and X on the horizontal axis Give an economic example of the above model. ii)

Answer 1

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