Consider a competitive market where the intersection of the demand and supply curves determine the equilibrium price and quantity of a good. Which of the following statements is true?

MATLAB: An Introduction with Applications
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ISBN:9781119256830
Author:Amos Gilat
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Chapter1: Starting With Matlab
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Consider a competitive market where the intersection of the demand and supply curves determine the
equilibrium price and quantity of a good. Which of the following statements is true?
If we fit a OLS line through observed quantity-price outcomes using log quantity-log price model, we will
be able to consistently estimate the price elasticity of demand.
If we can find an instrument that shifts only the supply, we will be able to use two-stage least squares to
estimate the price elasticity of demand.
O If we can find an instrument that shifts only the demand, we will be able to use two-stage least squares to
estimate the price elasticity of demand.
O None of the statements are true.
Transcribed Image Text:Consider a competitive market where the intersection of the demand and supply curves determine the equilibrium price and quantity of a good. Which of the following statements is true? If we fit a OLS line through observed quantity-price outcomes using log quantity-log price model, we will be able to consistently estimate the price elasticity of demand. If we can find an instrument that shifts only the supply, we will be able to use two-stage least squares to estimate the price elasticity of demand. O If we can find an instrument that shifts only the demand, we will be able to use two-stage least squares to estimate the price elasticity of demand. O None of the statements are true.
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