//  File MIT-Lab-22-02-04-04.txt. Edition 7/14/2010.

// 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
	20 100 10 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.
Together the demand and supply equations determine the equilibrium price
 and quantity. 
 
`
The lists under Dem specify the demand equation:
_____Const is the constant
_____PCoef is the price coefficient
_____XCoef is the coefficient of an exogenous variable affecting demand
_
Since the demand curve is downward sloping, the price coefficient of demand
 is negative. by default it equals -4.


`
The  lists under Sup specify the supply equation:
_____Const is the constant
_____PCoef is the price coefficient
_____XCoef is the coefficient of an exogenous variable affecting supply
_
Since the supply curve is upward slopint, the price coefficient of supply
 is positive. By default it equals 1.


`
The drop down box to the left of the Pause checkbox 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.
_
Note that 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.


` 0 -1 20 0
1. Be certain that the ordinary least squares (OLS) estimation
 procedure is selected in the Procedures drop down box.
 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.