Consider the following population regression model explaining daily cigarettes consumption for an individual (cigs) as a function of the price per
Consider the following population regression model explaining daily cigarettes consumption for an individual (cigs) as a function of the price per pack of cigarettes in the local area (price), the annual income of the individual (income) and their interaction.
cigs = β0 + β1price + β2income + β3price ∗ income + u
Statement: If the value of β3 is positive, it tells us that the marginal effect of an increase in price is larger when individual’s annual income is higher.
Agree or Disagree with the statement.
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