the ways in which the rent seeking can result in fall in the production of goods and services and the role played by the underground economy in reducing the fall in productive activities. Concept Introduction: Rent seeking is a type of resource or capital earning system by a company, organization or individual to obtain economic gain without reciprocating any benefits to society and creating wealth. This involves an earning income through profit, wage and rent. Rent is considered the least risky and easiest type of earning income because it requires resource ownership and the ability to use these resources to generate income by lending their use to others. It can be problematic when the company increases the no. of shares without increasing the total capital.

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If GDP goes up by 1% and the investment component of GDPgoes up by more than 1%, how is the investment share ofGDP changing in absolute terms?▶ In economics, what else is expressed as relative percentagechanges?

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Chapter 16, Problem 3.8P

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the ways in which the rent seeking can result in fall in the production of goods and services and the role played by the underground economy in reducing the fall in productive activities.

Concept Introduction:

Rent seeking is a type of resource or capital earning system by a company, organization or individual to obtain economic gain without reciprocating any benefits to society and creating wealth. This involves an earning income through profit, wage and rent. Rent is considered the least risky and easiest type of earning income because it requires resource ownership and the ability to use these resources to generate income by lending their use to others. It can be problematic when the company increases the no. of shares without increasing the total capital.

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If GDP goes up by 1% and the investment component of GDPgoes up by more than 1%, how is the investment share ofGDP changing in absolute terms?▶ In economics, what else is expressed as relative percentagechanges?

CEO Salary and Firm SalesWe can estimate a constant elasticity model relating CEO salary to firm sales. The data set is the same one used in Example 2.3, except we now relate salary to sales. Let sales be annual firm sales, measured in millions of dollars. A constant elasticity model is[2.45]ßßlog (salary) = ß0 + ß0log (sales) + u,where ß1 is the elasticity of salary with respect to sales. This model falls under the simple regression model by defining the dependent variable to be y = log(salary) and the independent variable to be x = log1sales2. Estimating this equation by OLS gives[2.46]log (salary)^=4.822 + 0.257 (sales) n = 209, R2 = 0.211.The coefficient of log(sales) is the estimated elasticity of salary with respect to sales. It implies that a 1% increase in firm sales increases CEO salary by about 0.257%—the usual interpretation of an elasticity.

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