Solve the two simultaneous equations to show how Q and P depend on u and v.

Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter7: Distance And Approximation
Section7.3: Least Squares Approximation
Problem 31EQ
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The demand for a commodity is given by Q = 30 +3₁P+u, where Q
denotes quantity, P denotes price, and u denotes factors other than
price that determine demand. Supply for the commodity is given by
Q = % + v, where u denotes factors other than price that determine
supply. Suppose that u and v both have a mean of zero, have variances
o and o2, and are mutually uncorrelated.
Solve the two simultaneous equations to show how Q and P depend on
u and v.
Transcribed Image Text:The demand for a commodity is given by Q = 30 +3₁P+u, where Q denotes quantity, P denotes price, and u denotes factors other than price that determine demand. Supply for the commodity is given by Q = % + v, where u denotes factors other than price that determine supply. Suppose that u and v both have a mean of zero, have variances o and o2, and are mutually uncorrelated. Solve the two simultaneous equations to show how Q and P depend on u and v.
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