Q

FIGURE 19.1 Hypothetical supply-and-demand functions and the identification problem.

There is an alternative and perhaps more illuminating way of looking at the identification problem. Suppose we multiply (18.2.1) by X (0 < X < 1) and (18.2.2) by 1 — X to obtain the following equations (note: we drop the superscripts on Q):

(1 — X) Qt = (1 — X)fo + (1 — X)Px Pt + (1 — X)u2t (19.2.9)

Adding these two equations gives the following linear combination of the original demand-and-supply equations:

where

Y0 = Xa0 + (1 - X)ß0 Y1 = Xa1 + (1 - X)ß1 Wt = XU1t + (1 - X)U2t

Was this article helpful?

0 0
Rules Of The Rich And Wealthy

Rules Of The Rich And Wealthy

Learning About The Rules Of The Rich And Wealthy Can Have Amazing Benefits For Your Life And Success. Discover the hidden rules and beat the rich at their own game. The general population has a love / hate kinship with riches. They resent those who have it, but spend their total lives attempting to get it for themselves. The reason an immense majority of individuals never accumulate a substantial savings is because they don't comprehend the nature of money or how it works.

Get My Free Ebook


Post a comment