1. An analysis of the effect of advertising on consumer price sensitivity is carried out. The log of the quantity purchased (ln q), the dependent variable, is run against the log of an advertising-related variable called RP (the log is variable ln RP ). An additive error term E is included in the transformed regres- sion. What assumptions about the model relating q and RP are implied by the transformation?
2. The following regression model is run.
log Y = 3.79 + 1.66X1 + 2.91X 2 + log e
Give the equation of the original, nonlinear model linking the explanatory variables with Y.