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ECO601 Assignment Spring 2020 Solution & Discussion Due Date: 18-08-2020

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i need eco601 gdb fall2020

In economics, many situations are characterized by diminishing marginal returns. In order to measure/estimate the nature of association between dependent and independent variables when it is of the type that the change in the dependent variable is likely to be less than the change in the independent variable, then we have considered the following function:

ey = eß0 Xß1 ...............................   (1)

Where Y represents average math SAT scores, ß0 shows intercept term, X indicates expenditures per student and ß1 is the estimated effect of expenditures per student on average math SAT scores. As equation (1) is a non-linear equation and we want to estimate this equation through OLS method of estimation. Comment on the transformation which is required to make this model linear and also mention the name of functional form which is obtained after applying the transformation. After estimation, how we can interpret the estimated parameters?

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