When the independent variables are expressed in log form and not squared in order to use linear regression to estimate the coefficients, then we are assuming that the elasticity of demand for that variable is constant.

Question

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When the independent variables are expressed in log form, the resulting coefficients represent elasticity rather than absolute change. By assuming that the elasticity of demand for that variable is constant, we are assuming a linear relationship between the independent variable and the dependent variable on a logarithmic scale.

When the Independent Variables Are Expressed in Log Form and Not