//  File MIT-Lab-22-02-04-04.txt. Edition 1/22/2013.

// Lists: Demand Constant, Price Coef, X Coef, X Var, and Error Var
	20  30  10  30
	-4.0 -1.0 3.0 -4.0
	1.0 2.0 1.0 1.0
	30 40 10 30
	10 20 10 20
	
// Lists: Supply Constant, Price Coef, X Coef, X Var, and Error Var
	0 10  10  0
	1.0 4.0 3.0 1.0
	1.0 2.0 1.0 1.0
	30 40 10 30
	10 20 10 20
	
// List Sample Size
	20 50 5 20

// Prob Specs: Pause Dem/Sup(0 if demand) SampleSize EstProc(0:OLS, 1:RF, 2:2SLS)

` 0 -1 20 0
Objective: Show that bias results when the ordinary least squares (OLS)
 estimation procedure is used to estimate the value of demand curve's
 price coefficient in a demand/supply model.
_
This simulation includes two equations:
_____One describing demand
and
_____One describing supply.
The demand and supply equations simultaeously determine the two endogenous variables:
 the equilibrium price and quantity.
 
`
The lists under Dem specify the demand equation:
_____Const is the constant
_____PCoef is the price coefficient (an endogenous explanatory variable)
_____XCoef is the coefficient of an exogenous variable affecting demand
_
Since the demand curve is downward sloping, the price coefficient of demand
 is negative. Its default value is -4.0.


`
The  lists under Sup specify the supply equation:
_____Const is the constant
_____PCoef is the price coefficient (an endogenous explanatory variable)
_____XCoef is the coefficient of an exogenous variable affecting supply
_
Since the supply curve is upward sloping, the price coefficient of supply
 is positive. Its default value is 1.0.


`
The drop down box immediately above the Start button is the Procedures
 drop down box. It offers the choice of three estimation procedures:
_____Ordinary least squares (OLS)
_____Reduced form (RF)
_____Two stage least squares (2SLS)
Ordinary least squares (OLS) is now selected.



` 0 -1 20 0
The Sup radio button and the PCoef radio button are selected.
 This means that the estimates for the supply equation's price
 coefficient will be reported.
_
1. Be certain that the ordinary least squares (OLS) estimation
 procedure is selected in the Procedures drop down box. initially,
 the sample size is 20. Click Start and then after many, many
 repetitions click Stop.
______1a. What does the mean (average) of the price estimates equal?
______1b. What does the variance of the price estimates equal?


` 0 -1 30 0
2. The sample size has been increased from 20 to 30. Click Start and then
 after many, many repetitions click Stop.
______2a. What does the mean (average) of the price estimates equal?
______2b. What does the variance of the price estimates equal?
_
3. Increase the sample size from 30 to 40. Click Start and then
 after many, many repetitions click Stop.
______3a. What does the mean (average) of the price estimates equal?
______3b. What does the variance of the price estimates equal?


`
4. Do results suggest that the ordinary least squares (OLS) estimation procedure
 for the price coefficient
______4a. unbiased?
______4b. consistent?
Explain.