6-3 Simultaneous equations models The structural form Assuming that the market always clears, and dropping the time subscripts for simplicity Q=a+ BP+ys+u Q=元+HP+kT+ν (5) This is a simultaneous structural form of the model The point is that price and quantity are determined simultaneously (price affects quantity and quantity affects price) P and o are endogenous variables, while s and tare exogenous We can obtain REdUCed FORM equations corresponding to (4)and(5) by solving equations (4) and(5)for P and for Q C Chris brooks2002,陈磊204© Chris Brooks 2002, 陈磊 2004 6-3 • Assuming that the market always clears, and dropping the time subscripts for simplicity (4) (5) This is a simultaneous STRUCTURAL FORM of the model. • The point is that price and quantity are determined simultaneously (price affects quantity and quantity affects price). • P and Q are endogenous variables, while S and T are exogenous. • We can obtain REDUCED FORM equations corresponding to (4) and (5) by solving equations (4) and (5) for P and for Q. Simultaneous Equations Models: The Structural Form Q = + P +S + u Q =  + P +T + v