In a study of the relationship between real aggregate consumption and prices in a specific country based on a time series of 104 observations, the following OLS regression function was obtained (standard errors in parentheses), Cf = 13.74 + 0.24P, R2 = 0.12, SER = 2.85, (1) (0.35) (0.05) where C, is logarithm of consumption and P is logarithm of price.Suppose that, in addition to a consumption equation Ct=u+l+un where the error at is independently and identically distributed with mean 0 and variance (Ti, 3. supply equation tZTu+71H+TQZt+Ut is considered, where Qt is lgal'ithm of production, 2; is a. productivity vari able independent of u; and m, and the error term v; is indelnt-mdent of 11 and is independently and identically distributed with menu 0 and variance a