Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 4

Let corn denote per capita consumption of corn in bushels, at the county level, let price be the price per bushel of corn, let income denote per capita county income, and let rainfall be inches of rainfall during the last corn-growing season. The following simultaneous equations model imposes the equilibrium condition that supply equals demand:

corn = ?1 price + ?1income + u1

corn = ?2 price + ?2rainfall + ?2rainfall2 + u2.

Which is the supply equation, and which is the demand equation? Explain.