2. The Fulton Fish Market has been operating in NYC for over 150 years. Your goa

Question

2. The Fulton Fish Market has been operating in NYC for over 150 years. Your goal is to estimate the demand (for fish) for this market using historic data on daily prices and quantities. Your structural demand equation is log(Q.) BB1 log(P)ui where Q' = quantity sold on day i, P = average daily price. (a) Is Pi endogenous in the demand equation? Explain (b) Suppose that this is the supply equation: log(Q) = ao + ai log(R) + ei (i) List at least two factors that can shift the supply curve for fish. That is, (ii) Are any of those factors uncorrelated with the error term u, in the demand (c) List some factors that can shift the demand curve for fish. That is, think what think what can be in the error term e, of the supply equation. equation? Explain your point can be in the error term u of the demand equation

Explanation / Answer

solution:

'Endogenous Variable'

A classification of a variable generated by a statistical model that is explained by the relationships between functions within the model.

For example, the equilibrium price of a good in a supply and demand model is endogenous because it is set by a producer in response to consumer demand.

so Pi is endogenous in demand equation.

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