Find implication of two-way causality-estimated coefficients, Microeconomics

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Find implication of two-way causality-estimated coefficients

Demand and supply for a product is expressed as

Qd = ßo + ß1P + ß2Y + U
Qs = αo + α1P + α2W + V

Where, Q is the quantity, P is the price, Y is income, and W is the average wage in the industry.

a. Given that in the market P and quantity depend on each other, a two-way causality, the E(PU) ≠ 0 and E(PV) ≠ 0. What is the implication of the two-way causality to the estimated coefficients of the system of equations above?

b. How could you find a consistent eatimate of the coefficient?

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Microeconomics: Find implication of two-way causality-estimated coefficients

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Microeconomics: Find implication of two-way causality-estimated coefficients

Reference No:- TGS038810

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Recent Questions Asked Microeconomics

Q : Do ols estimate coefficient-analyze statistical properties

Q : Problem related to gross income

Q : Optimal stage during the budget decision making

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Request for Solution File

Ask an Expert for Answer!!

Microeconomics: Find implication of two-way causality-estimated coefficients

Reference No:- TGS038810

Recent Questions Asked Microeconomics

Q : Do ols estimate coefficient-analyze statistical properties

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Q : Optimal stage during the budget decision making

Q : Amount of income-tax return from transactions

Q : Find implication of two-way causality-estimated coefficients

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