Question: Consider the following nonlinear model with multiplicative errors: Y = b0Xb1 1 Xb2 2 Xb3 3 Xb4 4 e b1 + b2 = 1 b3

Consider the following nonlinear model with multiplicative errors:

Y = b0Xb1 1 Xb2 2 Xb3 3 Xb4 4 e b1 + b2 = 1 b3 + b4 = 1

a. Show how you would obtain the coefficient estimates.
Coefficient restrictions must be satisfied.
Show all your work and explain what you are doing.

b. What is the constant elasticity for Y versus X4?
Show all your work.

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