4.2 Suppose that you believe the demand function has a constant-elasticity: Q = Ap, where A is...

4.2 Suppose that you believe the demand function has a constant-elasticity: Q = Apε, where A is a positive constant and ε is the constant elasticity of demand. You have some data and want to estimate the constant-

elasticity demand function Q = Apεu, where A is a positive constant, ε is the constant elasticity of demand, and u is an error term. Take logarithms of both sides of this equation and show that you get an equation that is linear in logarithmic terms (called a log-linear equation). Explain how you can estimate this equation in Excel or other programs using the OLS techniques that we have discussed.