Supply and demand for gas. Table 18.3, found on the textbook website, gives data on some of the variables that determine demand for and supply of gasoline in the U.S. from January 1978 to August 2002.* The variables are: pricegas (cents per gallon); quantgas (thousands of barrels per day, unleaded); persincome (personal income, billions of dollars); and car sales (millions of cars per year).

a. Develop a suitable supply-and-demand model for gasoline consumption.

b. Which variables in the model in (a) are endogenous and which are exogenous?

c. If you estimate the demand-and-supply functions that you have developed by OLS, will your results be reliable? Why or why not?

d. Save the OLS estimates of your demand-and-supply functions for another look after we discuss Chapter 20.