Course material

1. Activity 6 Bus Stat
Activity I – Suppose Y is a dichotomous dependent variable, and the data-generating
process for Y can be expressed as:Yi=0.1+0.03X1i−0.02X2i+UiInterpret the coefficients on
X1 and X2Activity II – Suppose you are trying to learn the relationship between the price
you charge for your product and the likelihood of purchase by individuals offered that price.
You offer your product online and for one month have randomly posted prices between $10
and $30. Using data on purchases and prices, you get the following estimates for a linear
probability model:Purchasei=1.7−0.06×PriceiYou are interested in the effect of a $20 price
increase (i.e., moving from the lowest price to the highest) on the likelihood of Purchase.
Why is answering this question problematic using this model?