Your Textbook Uses the Following Example of Simultaneous Causality Bias $\gamma _ { 0 }$

question 44

Essay

Your textbook uses the following example of simultaneous causality bias of a two equation system:
Y_i = β₀ + β₁X_i + u_i

X_i = $\gamma _ { 0 }$ + $\gamma _ { 1 }$ Y_i + v_i
To be more specific, think of the first equation as a demand equation for a certain good, where Y is the quantity demanded and X is the price. The second equation then represents the supply equation, with a third equation establishing that demand equals supply. Sketch the market outcome over a few periods and explain why it is impossible to identify the demand and supply curves in such a situation. Next assume that an additional variable enters the demand equation: income. In a new graph, draw the initial position of the demand and supply curves and label them D⁰ and S⁰. Now allow for income to take on four different values and sketch what happens to the two curves. Is there a pattern that you see which suggests that you might be able to identify one of the two equations with real-life data?

Distinguish between general and administrative expenses and other expense categories.

Understand the concepts of inventory shrinkage, its causes, and the recording process.

Differentiate between perpetual and periodic inventory systems, and their implications on financial reporting.

Understand the gross method of accounting for purchases and sales.

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Definitions:

Proprietary Company Information

Valuable data or knowledge owned by a company that is not public knowledge and gives the company a competitive edge.

Social Media

Platforms and technologies that enable users to create, share content, or participate in social networking.

Videoconference Participants

Individuals who take part in a virtual meeting or conference via video link, allowing them to see, hear, and communicate with others remotely.

Dress for the Occasion

The concept of choosing an attire that is suitable for a particular event, activity, or work environment.