Question

The interpretation of the slope coefficient in the model In(Y) = B. +B,X, +u, is as follows: A. a 1% change in X is associated with a B, % change in Y. B. a change in X by one unit is associated with a 100B, % change in Y. c. a 1% change in X is associated with a change in Y of 0.01 B.. D. a change in X by one unit is associated with a B, change in Y.

Answer 1

ln(Y)= B₀ +B₁ X+ u

Differentiate it wrt X:

(1/Y) dY/dX= B₁

[(dY/Y)/dx]= B₁

Here

B₁ = Relative change in Y/ absolute change in X

Relative change means percentage change and absolute change means quantity change.

So if X changes by a unit then there will be 100B₁ % change in Y.

Option B is the correct answer.