Consider the following nonlinear demand function, which is estimated for a pricesetting firm.
The method of leastsquares is used to estimate the parameters:
Q =
a
P
b
M
c
P
R
d
Where P is the price of the good, M is income, and P
R
is the price of a related good.
The results of the estimation are:
Dependent Variable: ln Q
RSquare
FRatio
PValue on F
Observations: 26
0.9248
90.18
0.0001
Parameter
Standard
Variable
Estimate
Error
TRatio
PValue
Intercept
3.04
1.01
3.01
0.0064
ln P
1.90
0.48
3.96
0.0007
ln M
2.16
0.675
3.20
0.0041
ln P
R
0.78
0.169
4.62
0.0001
a.
Before the nonlinear demand equation can be estimated using regression analysis,
the demand equation must be transformed into the following linear form:
ln Q =
ln a+b ln P+ c ln M+ dln P
R
b.
Are the parameter estimates statistically significant at the 5 percent level of
significance?
The parameters are statistically significant at the 5 percent level of
significance. The tratios are larger than 2.074.
c.
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 Spring '10
 Jamison
 Economics, Statistics, Supply And Demand, ln a+b ln, Variable Intercept ln, ln M+ dln

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