Question

Using cross-sectional, observational data recording prices, measured in dollars, and quantities sold, measured in thousands of units, for 18 locations, these OLS results are obtained: ln(Q)-hat = 5.8984 - 1.0814*ln(P) with an R-squared of 0.5544. The interpretation of these results can be descriptive only and not causal because price will be endogenous. In locations with prices that are 1 percent higher we observe quantities sold that are ___ percent lower on average. (Record your answer as a positive number accurate to at least the nearest first decimal place with standard rounding.)

Answer 1

In locations with prices that are 1 percent higher we observe quantities sold that are

1.0814*(ln(101)-ln(100))*100=1.08 % lower on average.