Question

in the following models, paying attention to the functional form, how would you interpret the coefficient b1;

(I) log(price)=b0+b1log(nox) +b2 rooms +U

(ii) In(y)= b0 +b1 x +u

(iii) y=b0 +b1 In(x) +u

(iii) In(y)=b0 +b1 In(x) + u

Answer 1

Answer

(I)

log(price)=b₀+b₁log(nox) +b₂ rooms +U

b₁ will be interpreted as follows :

1% increase in nox will result in increase in Price by b₁%

(ii)

In(y)= b₀ +b₁x +u

b₁ will be interpreted as follows

1 unit increase in x will result in increase in y by (100*b₁)%

(iii)

y=b₀ +b₁ In(x) +u

b₁ will be interpreted as follows

1% increase in x will result in increase in y by (b₁/100) units.

(iv)

In(y)=b0 +b1 In(x) + u

b₁ will be interpreted as follows

1% increase in x will result in increase in y by b₁%.