4. (2) Consider the supply and demand model below Demand: q=-p+3+2x+e Supply: p=q+1+e a) Find the reduced form equations

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4 2 Consider The Supply And Demand Model Below Demand Q P 3 2x E Supply P Q 1 E A Find The Reduced Form Equations 1 (34.91 KiB) Viewed 21 times

4. (2) Consider the supply and demand model below Demand: q=-p+3+2x+e Supply: p=q+1+e a) Find the reduced form equations for p and q as a function of the exogenous variable x. b) Now suppose that the demand equation is q=-5p+11+6x+e. Find the reduced form equations for p and q using this demand equation and the original supply equation. c) If we have N observations on p, q, and x, can we consistently estimate the reduced form equations by OLS? Why? d) If we have N observations on p, 4, and x, can we consistently estimate the supply equation by OLS? Why? C) Is the supply equation “identified"? That is, if we have N observations on p, q, and x. can we consistently estimate the supply equation by 2SLS? Why? f) Is the demand equation “identified"? That is, if we have N observations on p, q, and r, can we consistently estimate the demand equation by 2SLS? Why?