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9 2. (A) Conaider a product inarket with a supply function Qui b0 +bIPi+ usi, and a demand function Qdi - 0 + blPi + udi, and a market equilibnum condition Qsi-Qdi, wbere usi and udi are mutually independent i.i.d. random variables, both with a mean of zero. a. Show that Pi and udi are correlated. b. Show that the OLS estimator of bl is inconsistent. c. How would you estimate b0, b1, and g0?

9 2. (A) Conaider a product inarket with a supply function Qui b0 +bIPi+ usi, and a demand function Qdi - 0 + blPi + udi, and a market equilibnum condition Qsi-Qdi, wbere usi and udi are mutually independent i.i.d. random variables, both with a mean of zero. a. Show that Pi and udi are correlated. b. Show that the OLS estimator of bl is inconsistent. c. How would you estimate b0, b1, and g0?

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Q 2. (A) Consider a product inarket with a supply funetion Qui- b0 + bIPi+ usi, and a demand function Qdi- g0 + b1Pi + udi, and a market equilibnum condition Qsi = Qdi, wbere usi and udi are mutually independent i.i.d. random variables, both with a mean of zero. a. Show that Pi and udi are correlated. b. Show that the OLS estimator of bl is inconsistent. c. How would you estimate b0, bl, and g0?
Transcribed Image Text:Q 2. (A) Consider a product inarket with a supply funetion Qui- b0 + bIPi+ usi, and a demand function Qdi- g0 + b1Pi + udi, and a market equilibnum condition Qsi = Qdi, wbere usi and udi are mutually independent i.i.d. random variables, both with a mean of zero. a. Show that Pi and udi are correlated. b. Show that the OLS estimator of bl is inconsistent. c. How would you estimate b0, bl, and g0?
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