Profit. A used car dealer is attempting to develop a model which can predict its future net profit. The dealer has collected some data from previous sales and reported the following model which associates the net profit with the number of used cars sold and the advertisement cost.

Net Profit = -1.77 + 5.07 ln1Number of Used Cars Sold2

-0.36 ln1Advertisement Cost2 Net Profit is in thousand dollars.

a) The coefficient of ln(Advertisement Cost) is negative.

What does that mean in the context of this model? What does it mean that the coefficient of ln(Number of Used Cars Sold) is positive?

b) The model uses the (natural) logarithms of the two predictors.

What does the use of this transformation say about their effects on net profit earned by the dealer?