You assume the following relationship: u=x1αx2β. You take the following monotonic transformation: v=ln(u). You get a linear rela
tionship: v = α∙ln(x1) + β∙ln(x2). You run a linear regression and get point estimates a=2.07 and b=0.93. What do you think is the MRS between positive and negative ads
1 answer:
Answer:
MRS = -2.23 (x2/x1)
Explanation:
The concept of Marginal rate of substitution(MRS) is applied here. MRS occurs when a consumer is willing to give up a good at the expense of another whilst still maintaining the same utility. The principle of partial differentiation is mostly applied in MRS Calculation.
From MRS = -(MUx/MUy)
The steps are as shown in the attachment
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Enter the following code to get the required conditions for the answer.
boston_under_5_height = 1.2
manila_under_5_height = 0.6
boston_5_to_under_10_height = 3.2
manila_5_to_under_10_height = 1.4
boston_under_10 = boston_under_10 = 5*boston_under_5_height + 5*boston_5_to _under_10_height
manila_under_10 = manila_under_10 = 5*manila_under_5_height + 5*manila_5_to _under_10_height
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