Introductory Econometrics 4th Edition by Jeffrey Wooldridge

تمرين 11

Write a two-equation system in "supply and demand form," that is, with the same variable y1 (typically, "quantity") appearing on the left-hand side:
y1= 1y2+ 1z1+u1
y1 = 2y2+ 2z2+u2
(i) If 1 = 0 or 2 = 0, explain why a reduced form exists for y1. (Remember, a reduced form expresses y1 as a linear function of the exogenous variables and the structural errors.) If 1 0 and 2 = 0, find the reduced form for y2.
(ii) If 1 0, 2 0, and 1 2, find the reduced form for y1. Does y2 have a reduced form in this case
(iii) Is the condition 1 2 likely to be met in supply and demand examples Explain.