Double-log functional form

This is a especially useful functional form, since it allows the analyst to estimate price elasticities and income elasticities.

The coefficient attached to a price explanatory variable (x), in a demand equation for instance (where y is quantity demanded), using a double-log function form like the following:

ln(y) = a + b ln(x) + e

gives the elasticity of y (e.g., quantity demanded) with respect to x (.e.g., price).

The natural logarithm applied to an exponential equation transform the equation into a linear equation in logarithms.