To explain personal consumption (CONS) measured in dollars, data is collected fo

Question

To explain personal consumption (CONS) measured in dollars, data is collected for

INC: personal income in dollars
CRDTLIM: $1 plus the credit limit in dollars available to the individual
APR: average annualized percentage interest rate for borrowing for
the individual
ADVT: per person advertising expenditure in dollars by manufacturers
in the city where the individual lives
SEX: gender of the individual; 1 if female, 0 if male

A regression analysis was performed with CONS as the dependent variable and ln(CRDTLIM), ln(APR), ln(ADVT), and SEX as the independent variables. The estimated model was

= 2.28 - 0.29 ln(CRDTLIM) + 5.7 ln(APR) + 2.35 ln(ADVT) + 0.39 SEX


Referring to Table 15-1, what is the correct interpretation for the estimated coefficient for ADVT?
A) A 100% increase in per person advertising expenditure by the manufacturer will result in an estimated average increase of 2.35% on personal consumption, holding other variables constant.
B) A 1% increase in per person advertising expenditure by the manufacturer will result in an estimated average increase of 2.35% on personal consumption, holding other variables constant.
C) A $1 increase in per person advertising expenditure by the manufacturer will result in an estimated average increase of $2.35 on personal consumption, holding other variables constant.
D) A 100% increase in per person advertising expenditure by the manufacturer will result in an estimated average increase of $2.35 on personal consumption, holding other variables constant.

Explanation / Answer

The estimated model was CONS=2.28 - 0.29 ln(CRDTLIM) + 5.7 ln(APR) + 2.35 ln(ADVT) + 0.39 SEX The correct interpretation for the estimated coefficient of ADVT is that a $1 increase per person advertising expenditure by the manufacturer will result in an estimated average increase of $2.35 on personal consumption, holding other variables constant.

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