Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 6

Suppose that Person A earns $35,000 per year and Person B earns $42,000.

(i) Find the exact percentage by which Person B’s salary exceeds Person A’s.

(ii) Now, use the difference in natural logs to find the approximate percentage difference.

Step 1 of 2

Income of A is equal to $35,000 per year and B=$42,000 per year.

(i) The salary increase of B to A is:

B’s salary is 20% greater than that of A’s salary.