When using a multiplicative power function (Y = a X₁^b¹ X₂^b² X₃^b³)to represent an economic relationship,estimates of the parameters (a,and the b's)using linear regression analysis can be obtained by first applying a ____ transformation to convert the function to a linear relationship. A)semilogarithmic B)double-logarithmic C)reciprocal D)polynomial E)cubic

Question

Quizplus · Accepted Answer

The best choice for transforming the multiplicative power function to a linear relationship is the double-logarithmic transformation. This involves taking the natural logarithm of both sides, resulting in ln(Y) = ln(a) + b1ln(X1) + b2ln(U1B1) + b3ln(P1) +...+ bp ln(S1P0). This transformation allows for estimating the parameters using linear regression analysis because it converts the multiplicative relationship to an additive relationship. The other transformations listed are not appropriate for this type of function.

When Using a Multiplicative Power Function (Y = a X1b1

When Using a Multiplicative Power Function (Y = a X₁^b¹