The following simultaneous equations describe the demand and supply for a particular good in a competitive market. Q_i = ₁P_i + ₁z_i₁ + u_i₁
Q_i = ₂P_i + ₂z_i₂ + u_i₂
Which of the following are the endogenous variables in this model?

Question

The following simultaneous equations describe the demand and supply for a particular good in a competitive market. Q_i =

The following simultaneous equations describe the demand and supply for a particular good in a competitive market. Q<sub>i</sub> = <sub>1</sub>P<sub>i</sub> + <sub>1</sub>z<sub>i</sub><sub>1</sub> + u<sub>i</sub><sub>1</sub> Q<sub>i</sub> = <sub>2</sub>P<sub>i</sub> + <sub>2</sub>z<sub>i</sub><sub>2</sub> + u<sub>i</sub><sub>2</sub> Which of the following are the endogenous variables in this model? A) Pi<sub>,</sub> zi<sub>1,</sub> and z<sub>i</sub><sub>2</sub> B) P<sub>i</sub> and Q<sub>i</sub> C) zi<sub>1,</sub> and z<sub>i</sub><sub>2</sub> D) u<sub>i</sub><sub>1</sub> and u<sub>i</sub><sub>2</sub>

₁P_i +

₁z_i₁ + u_i₁
Q_i =

₂P_i +

₂z_i₂ + u_i₂
Which of the following are the endogenous variables in this model?

Quizplus · Accepted Answer

In this model, the endogenous variables are the variables that are determined within the model itself, and are not exogenously determined. In this case, the endogenous variables are the equilibrium price (P_i) and quantity (Q_i) of the good. The other variables (zi_1,, z_i₂, u_i₁ and u_i₂) are exogenous variables, which are determined outside of the model and affect the equilibrium price and quantity. Therefore, the best choice is B, as it includes only the endogenous variables. P_i and Q_i are the endogenous variables in the given simultaneous equation model.

The Following Simultaneous Equations Describe the Demand and Supply for a Particular