BASIC ESTIMATION TECHNIQUES
In this chapter we will learn statistical techniques used in the estimation of economic and
business quantitative relationships, like demand functions, production functions, cost functions,
etc. We will concentrate on Linear an

IV. CHANGES IN MARKET EQUILIBRIUM
Numerical exercises
Lets continue using the processed pork example.
The extended or generalized demand equation for processed pork is
QD = 171 - 20 P + 20 PB + 3 PC + 2 M
(1)
If PB = 4, PC = 3, and M = 12.5, then the redu

V. PRICE FLOOR AND PRICE CEILING
So far, we have assumed that prices were determined by market forces (demand and supply)
without government intervention. Governments have frequently intervened in markets
legislating prices below or above the equilibrium

Some Useful Differentiation Rules for a one variable function
1. Derivative of a constant function.
Then
dy/dx = 0.
Example:
If y = 10
2. Derivative of a Power function.
Then
If y = f(x) = c (c is a constant)
then dy/dx = 0.
If y = f(x) = xn
dy/dx = n x n

II. Supply
1. Extended and reduced equations of supply
The extended or generalized equation of supply is
QS = F (P; T, PF, PS, PC, NS, Exp)
where
(1)
QS = quantity supplied of one particular good
P = market per unit price of that good
T = state of the tec

III. MARKET EQUILIBRIUM
Now we will put both demand and supply together to understand how prices are determined in a
free market situation (with no government intervention).
1. Market (or total) Demand
Market (or total) demand is the summation of all indi

I. Demand
1. Extended and reduced equations of demand
The extended or generalized equation of demand is
QD = F (P; M, PS, PC, NB, Exp)
where
(1)
QD = quantity demanded of one particular good
P = market per unit price of that good
M = average consumer inco

GBA 5212
Dr. Manrique
Problem Set 2
1. A firms cost structure is summarized by the following Total Cost function:
TC = Q3 4Q2 + 10 Q + 75
where TC represents the total cost and Q represents the level of output produced by the
firm. Note: TC = f (Q)
Derive