Interaction terms o For a model of the form y-Bo+ Bx+ Bxx2+ B3xx2+ u we cant interpret B alone as measuring the change in y with respect to x, we need to take into account 3 as well, since △ B+B3x2, so to summarize △ the effect of x, on y we typically evaluate the above at x Economics 20- Prof andersonEconomics 20 - Prof. Anderson 11 Interaction Terms For a model of the form y = b0 + b1x1 + b2x2 + b3x1x2 + u we can’t interpret b1 alone as measuring the change in y with respect to x1 , we need to take into account b3 as well, since 2 1 1 3 2 1 evaluate the above at the effect of on we typically ,so to summarize x x y x x y = b + b  