- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 6. Functional Forms for Simple Linear Regression

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**CFA Practice Question**

Consider a demand function: Q = α P

^{β}, where Q is the quantity demanded, α is a shifting parameter, P is the price of the good, and the parameter β is less than zero for a downward-sloping demand curve. You can transform the data into a ______ model to achieve linearity.A. The lin-log model

B. The log-lin model

C. The log-log model

**Explanation:**If you take the natural log of both sides, you get: lnQ = lnα + β lnP, where you can treat lnα as the intercept.

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