cannot he lincoried 2 (3 points each) Calculate the marginal efflect of X on Yof

Question

cannot he lincoried 2 (3 points each) Calculate the marginal efflect of X on Yof the following models if the current value of x-2 is. 3. (3 points) Answer True or False: If a categorical variable contains two values: Male and Female, the following model can be estimated via OLS: Y ° + Ax, + 2MALE + AFEMALE +E (2 points) Answer True or False: The R2 between these two models can be compared: Model 1: In Y., + ,Kite N-25 4. Model 2: In Y=° + 1logX1 +E N-50 . (2 points) Answer True or False: In a log-log model, the coefficient of the explanatory variable measures the elasticity of Y with respect to X

Explanation / Answer

Q2. The easiest way to solve these is to calculate the value of dY/dX at particular value of X.

(i) dY/dX = 2-X (at X= 2) = 0

(ii) dY/dX = 0.5/X^2 (at X=2) = 5/40= 1/8 = 0.125

Q3. True. However, when analysing, an interaction variable can be added that will tell the relationship between two variables.

Q4. False. The R-square values of the two specified models cannot be compared because this value essentially indicates the proportion of variance explained. If the dependent variable is itslef changed, then there will be discrepancy since the starting value of the variance explained in the dependent variables is essentially not same. Thus, making the two incomparable.

Q5. True. The coefficients in a log-log model represents

= % change in response variable / % change in explanatory variable.

This is essentially the elasticity of Y with respect to X.

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