Consider the log-log specification of equation (13.38).

(a) What is the expression for E(ln yi) in terms of α, β, and xi?

(b) Change xi by Δx. Write the new expected value of the dependent variable as

(c) Use the approximation of equation (13.30) and the result of exercise 13.10c to rewrite

(d) Subtract the expression in part a from the expression in part c and rearrange to obtain

Transcribed Image Text:

E[In(y,+Ay)]=a+ln(x+Ax).