Considering the following relationships, how would you explain that economic theory postulates exact relationships between the...

 

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Considering the following relationships, how would you explain that economic theory postulates exact relationships between the economic variables? How can these be transformed into econometrics relations? i) ii) Supply function: S,= a + BP + BPs Demand function: D = a + BP + BY where, D = quantity demanded, P = price, and Y = income iii) Consumption function: C = a + BY where, C = consumption expenditure, and Y = disposable income. a) where, S, quantity supplied, P, = price, and Py = factor price = iv) Cost function: C = a + Bx b) where, C = total cost, and x = total output. what is the economic meaning of each of the coefficient involved in the above relationships? What would you expect the signs and size of the coefficients to be in each of the above relationships? Considering the following relationships, how would you explain that economic theory postulates exact relationships between the economic variables? How can these be transformed into econometrics relations? i) ii) Supply function: S,= a + BP + BPs Demand function: D = a + BP + BY where, D = quantity demanded, P = price, and Y = income iii) Consumption function: C = a + BY where, C = consumption expenditure, and Y = disposable income. a) where, S, quantity supplied, P, = price, and Py = factor price = iv) Cost function: C = a + Bx b) where, C = total cost, and x = total output. what is the economic meaning of each of the coefficient involved in the above relationships? What would you expect the signs and size of the coefficients to be in each of the above relationships?

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The image contains a set of four equations representing different economic functions namely the demand function supply function consumption function and cost function Each equation is a linear relatio... View the full answer