A simplified version of Suits€™s model of the watermelon market is as follows:*

Where

P = price

(Q/N) = per capita quantity demanded

(Y/N) = per capita income

F_t = freight costs

(P/W) = price relative to the farm wage rate

C = price of cotton

T = price of other vegetables

N = population

P and Q are the endogenous variables.

a. Obtain the reduced form.

b. Determine whether the demand, the supply, or both functions are identified.

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Demand equation: P: = a0 + ai(Q:/N,) + «2(Y; /N;) + az F; + u! Q, = Bo + B1(P:/W;)+ B2 P;–1 + B3C;-1+ B4T;–1+u2: Crop supply function: