Question: 1. Given data on y and x explain what functional form you will use and how you will estimate the parameters if
(a) y is a proportion and lies between 0 and 1.
(b) x > 0 and x assumes very large values relative to y.
(c) You are interested in estimating a constant elasticity of demand function.
2. (Stochastic regressors) In the linear regression model
y1 = α + βx1 + u1
Suppose that x1, IN(λ2). What is the (asymptotic) distribution of the least squares estimator ? Just state the result. Proof not required.