Consider the economic model D₂ = a-BP (a,B> 0) St = 0+8Pt-1+Et (0,8>0) Dt = St where P is price, D is demand, S is supply and Et is a white noise for the supply shock.
Consider the economic model D₂ = a-BP (a,B> 0) St = 0+8Pt-1+Et (0,8>0) Dt = St where P is price, D is demand, S is supply and Et is a white noise for the supply shock.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter4: Estimating Demand
Section: Chapter Questions
Problem 5E
Related questions
Question
![Consider the economic model
D₁ = α-ßP、 (a,B> 0)
St = 0+8Pt-1+ Et (0,8 > 0)
St
De
where P is price, D is demand, S is supply and Et is a white noise for the
supply shock.
(i) Show price may be modeled as an AR(1) process. That is, of the form
P₁ = a +bPt-1 + Et
where a and b are constants.
(ii) Find a conditions that ensures that the random price has a finite mean
(iii) When condition (ii) is satisfied, describe how P changes with t.
(iv) Find the mean and variance (of price) assuming stationarity.
담
hp
28°C Light rain](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff557dfe2-1c62-49ec-a407-c0ca8742f4e9%2F9e382470-9443-4073-91e8-072b3b73c388%2Fl1g3pg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the economic model
D₁ = α-ßP、 (a,B> 0)
St = 0+8Pt-1+ Et (0,8 > 0)
St
De
where P is price, D is demand, S is supply and Et is a white noise for the
supply shock.
(i) Show price may be modeled as an AR(1) process. That is, of the form
P₁ = a +bPt-1 + Et
where a and b are constants.
(ii) Find a conditions that ensures that the random price has a finite mean
(iii) When condition (ii) is satisfied, describe how P changes with t.
(iv) Find the mean and variance (of price) assuming stationarity.
담
hp
28°C Light rain
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 3 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Managerial Economics: Applications, Strategies an…](https://www.bartleby.com/isbn_cover_images/9781305506381/9781305506381_smallCoverImage.gif)
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
![Managerial Economics: Applications, Strategies an…](https://www.bartleby.com/isbn_cover_images/9781305506381/9781305506381_smallCoverImage.gif)
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning