Consider a product market with a supply function 11eb9b5b_3ede_3058_bf3e_efc98f21a578_SM2686_00 a demand function 11eb9b5b_3ede_5769_bf3e_fd7f708ccf25_SM2686_11 and a market equilibrium condition 11eb9b5b_3ede_576a_bf3e_4372075ff25f_SM2686_11 where 11eb9b5b_3ede_7e7b_bf3e_4506452fbb76_SM2686_11 are mutually independent i.i.d. random variables, both with a mean of zero. a. Show that P, and 11eb9b5b_3ede_7e7c_bf3e_095ea2e36b0f_SM2686_11 are correlated. b. Show that the OLS estimator of ß 1 is inconsistent. c. How would you estimate ß 0 , ß 1 , and 0

Introduction to Econometrics 3rd Edition by James Stock, James Stock

Edition 3ISBN: 978-9352863501

Edition 3ISBN: 978-9352863501

Exercise 16

Consider a product market with a supply function

a demand function

and a market equilibrium condition

where

are mutually independent i.i.d. random variables, both with a mean of zero.
a. Show that P, and

are correlated.
b. Show that the OLS estimator of ß 1 is inconsistent.
c. How would you estimate ß 0 , ß 1 , and 0

Explanation

Verified

a.
The quantity demand Q d and quantity ...