Suppose we estimate the following econometric equation Quantity 0 1Price where Quantity is the quantity supplied by
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Question:
Suppose we estimate the following econometric equation Quantity 0 1Price where Quantity is the quantity supplied by a particular market and Price would be the price of that particular good in dollars.
1. Explain two concerns that economists might have with using this equation as trying to estimate price impact on the quantity supplied in a market.
2. (Hint one of these concerns might involve explaining the role of endogeneity in this instance). Then explain one solution that economists would pursue.
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