4. Consider a product market with a supply function Q = Po + B₁P; + us, a demand function Qd = = 70 +u, and a market equilibrium condition Q = Qd, where u and u are mutually independent i.i.d. random variables, both with a mean of zero. (a) Show that P; and us are correlated. (b) Show that the OLS estimator of 3₁ is inconsistent. (c) How would you estimate 30, 31, and yo?
4. Consider a product market with a supply function Q = Po + B₁P; + us, a demand function Qd = = 70 +u, and a market equilibrium condition Q = Qd, where u and u are mutually independent i.i.d. random variables, both with a mean of zero. (a) Show that P; and us are correlated. (b) Show that the OLS estimator of 3₁ is inconsistent. (c) How would you estimate 30, 31, and yo?
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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