Correlation between supply and demand function

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Consider a product with a supply function Q1 = β0 + β1 + u1, a demand function Qd=y0+uid. and a ,market equilibrium condition Qs= Qdi, where uis and uid­ are mutually independent i.i.d. random variables, both with a mean of zero.

a. Show that Pi and usare correlated.

b. Show that the OLS estimator of β0, β1 and γ0?

Reference no: EM1313158

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