ECN437Using Data to Determine Parameters

# ECN437Using Data to Determine Parameters - ECN437

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ECN437 Using Data to Determine Parameters One task that economists face all the time is determining the values of  parameters appearing in key economic equations. For example, suppose we  know that a particular firm faces a demand curve for its product that looks  like the following: Q = A - B*P where Q is the quantity people buy, P is the price of the product, and A and  B are unknown constants. For this to be of any use to the firm, however, we  need to figure out the numerical values of A and B. In order to do that, we need to collect and use data. In this case, we could  look at the prices the firm has charged in the past and the quantities it has  sold. Suppose that firm has the following information: Ye ar Price  Charged Sales 19 95 10.00 800.0 0 19 96 20.00 600.0 0 Since the demand curve would have held in both years, we can put these  numbers into it to get the following two equations:

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## This note was uploaded on 04/03/2012 for the course ECN 437 taught by Professor Peterwilcoxen during the Spring '12 term at Syracuse.

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ECN437Using Data to Determine Parameters - ECN437

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