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5 [10pts] Consider the estimation of the log-log model: In salary = 4.822 + 0.257 In sales where salary is the annual salary of the
5 [10pts] Consider the estimation of the log-log model: In salary = 4.822 + 0.257 In sales where salary is the annual salary of the CEO in thousands of dollars, and sales is annual firm sales in millions of dollars. (a) Interpret the coefficient 0.257 [2pts] (b) Interpret the intercept 4.822 [2pts] (c) How much does CEO salary increase if firm sales increase by 10%? [2pts] (d) A CEO with a salary of 200 thousand dollars is hired by a firm with sales of 100 million dollars. How much will be the CEO's salary if the firm sales increase by 50 million dollars? [2pts] (e) Now we measure salary in dollars instead of thousands of dollars: salarydol = 1, 000salary . Without re-estimating the model, what is the new coefficient on In sales? Explain. [2pts]
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