Question

In the log-log model, the slope coefficient indicates

A. the effect that a unit change in X has on Y.

B. the elasticity of Y with respect to X.

C. that a 1 % increase in X is associated with a 100β2% increase in Y.

D. None of these answers are correct.

Answer 1

The answer is:

A simple log-log model is given by:

and differentiate it to obtain

The term on the right-hand side is the percent change in X, and the term on the left-hand side is the percent change in Y, so measures the elasticity.

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