Which of the following regressions would yield a coefficient estimate that would be directly interpreted as the price elasticity of demand? A) Quantity_i = α₀ + α₁log(Price_i) B) log(Quantity_i) = α₀ + α₁log(Price_i) C) Quantity_i = α₀ + α₁Price_i D) Quantity_i = α₀ - α₁log(Price_i)

Question

Quizplus · Accepted Answer

The coefficient estimate in option B is directly related to the logarithm of price, which is consistent with the formula for price elasticity of demand. Specifically, the coefficient estimate on the logarithm of price in option B would be equal to the absolute value of the price elasticity of demand.

Which of the Following Regressions Would Yield a Coefficient Estimate