Use the GRETL data set kmenta.gdt to estimate the structural equations:
where Q is food per capita (quantity); P is the ratio of food price to a cost of living index; D is Disposable income; F is a measure of cost, deflated food prices paid to consumers.
A. Is the demand equation, Qd, under, over, or exactly identified?
B. Is the supply equation, Qs, under, over, or exactly identified?
C. With a Hausman test, determine if assumption A5 holds for the demand equation.
D. With a Hausman test, determine if assumption A5 holds for the supply equation.
E. Using two-stage least squares, estimate the demand equation in GRETL.
F. Using two-stage least squares, estimate the supply equation in GRETL.
G. Print your results from A, B, E, and F is a comparison table.
H. For supply and demand, which equations, OLS or two-stage, which estimation technique has the most desirable properties?