1.
Identify and discuss at least two economic phenomena for which the linear-in-parameters/linear-
in-variables regression model may not be appropriate (besides any mentioned in the text). Select
an economic phenomenon and determine which of the models discussed in this chapter would be
most appropriate to apply to the phenomena in question. Explain your rationale
Solution
Two economic phenomena that linear regression model is not appropriate for study are stock
price movement and the economic growth. The stock price movement is very volatile and linear
regression model is not appropriate for the study, and as for the study of economic growth
exponential regression is applied for the study.
*For the second part the question in not complete.