Consider the Following Distributed Lag Model $Y _ { t } = \beta _ { 0 } + \beta _ { 1 } X _ { t } + \beta _ { 2 } X _ { t - 1 } + u _ { t }$

question 35

Essay

Consider the following distributed lag model $Y _ { t } = \beta _ { 0 } + \beta _ { 1 } X _ { t } + \beta _ { 2 } X _ { t - 1 } + u _ { t }$ , where $u _ { t } = \phi _ { 1 } u _ { t - 1 } + \tilde { u } _ { t } , \tilde { u } _ { t }$ is serially uncorrelated, and $X$ is strictly exogenous. (a)How many parameters are there to be estimated between the two equations?

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Definitions:

Total Revenue

The total income generated by a business from the sale of goods and services before any costs or expenses are deducted.

Price Decrease

refers to a reduction in the cost of a good or service, which can lead to an increase in demand due to the law of demand, assuming other factors remain constant.

Unit Elastic

A situation in which the percentage change in quantity demanded or supplied is equal to the percentage change in price.

Total Revenue

The total amount of money generated by the sale of goods or services before any costs are deducted.