Question

For each of the following estimated models provide the simplest possible explanation of the effect of
IQ (intelligent quotient has mean of 100) on EARNS (annual earnings in $).
Hint: For models with logs use elasticities or semi-elasticities.
(a) EARNS = 1000 + 500 × IQ.
(b) EARNS = 20000 + 200 × IQ + 2 × IQ^2 .
(c) EARNS = −20000 + 50000 × ln(IQ).
(d) EARNS = 45000 + 10000 × d , where d = 1 if IQ > 100 and d = 0 if IQ ≤ 100.
(e) ln(EARNS) = 10 + 0.010 × IQ.
(f) ln(EARNS) = 5 + 0.90 × ln(IQ).
(g) For the model in (c) give the marginal effect at the mean if
¯
IQ = 110.

Answer 1

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