You are a new econometrician for the United States Department of Agriculture stu
ID: 3267294 • Letter: Y
Question
You are a new econometrician for the United States Department of Agriculture studying the egg market. You estimate the following supply and demand curves in the structural equations model. Demand: Q^d = alpha + beta_1 Price_i + beta_2 Disposable Income_i + beta_3 Price of Turkey + v_1 Supply: Q^s = phi_0 + phi_1 Price + phi_2 Im migration_i + phi_3 Techno log y_i + v_2 1. What are the endogenous variables in this system of equations? 2. What are the exogenous variables in this system of equations?Explanation / Answer
An endogenous variable is a classification of a variable generated by a statistical model that is explained by the relationships between functions within the model.
Where as the exogeneous variable is whose qualitative characteristics and method of generation are not specified by the model .
Here in this given example of supply and demand curve. For demand curve as the price of egg & the price of turkey increases demand goes down but the demand goes up with Disposable income making all of them as endogenous variable.
For Supply curve , if price goes down supply has no direct effect over price generally making it exogenous variable whereas immigration and technlogy boosts up supply hence they are endogenous variables
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.