Question: Consider the model for the Supply (QS) and Demand (QD) for shoes. The model is originally specified as a function of Price (P). Initially supply

Consider the model for the Supply (QS) and Demand (QD) for shoes. The model is originally specified as a function of Price (P).

Initially supply and demand equations are specified as: QS = β1 + β2P + ε
QD = α1 + α2P + µ

Neither equation is identified. Three exogenous variables are obtained: X2, X3, and X4.


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