ECO601 - Business Econometrics

Re: ECO601 GDB 1 Solution and Discussion Total Marks 10 Starting Date Tuesday, June 02, 2020 Closing Date Saturday, June 06, 2020 Status Open Question Title GDB Question Description Graded Discussion Board Spring 2020 Business Econometrics (ECO601) In Economics, the change which is observed in the total cost due to the production of one more unit of a product/output is called marginal cost. In most of the industrial production, initially, the marginal cost falls as the volume of production increases because of economies of scale. In the beginning, costs are lower for the reason that there are some discounts on the factors that are engaged in performing different tasks like, bulk purchases of raw materials, efficient use of machinery and specialized labors. However, a point arises in the production process where the marginal cost will start to rise again as a result of diseconomies of scale. At this stage, the cost may rise because of various factors like to spend more money to obtain the sources, buy more equipment, hire more management, and tap out a local source of raw materials. Now consider the following marginal cost function (MC) where Q is the level of output: In this given function; a, b and c are coefficients. Now discuss what will be the conditions (signs) of coefficients b and c in order to get the required shape of the marginal cost (MC) curve? If the required condition of coefficients for the MC curve is violated then what will be the shape of the curve?

Total Marks 5 Starting Date Tuesday, January 21, 2020 Closing Date Monday, January 27, 2020 Status Open Question Title GDB Question Description Graded Discussion Board Fall 2019 Business Econometric (ECO601) A model with a single dependent variable and one or more explanatory variables is called a single equation model. On the other hand, a system of equations which expresses a set of relationships among variables or shows the joint dependence of variables is called a simultaneous equation. In the simultaneous equation model, there is a set of equations in which a dependent variable in one equation may be the explanatory variable in some other equations. For example, consider the following demand-supply model. [image: dVdHIsr.png] Equilibrium condition: [image: cVlYbZ2.png] Where, Qd is quantity demand, Qs is quantity supplied, P = Price, Y = disposal income, G = cost of main raw materials and t = time. This is an example of simultaneous equation model. Requirement: By applying OLS (Ordinary Least Squares) to individual equation of this simultaneous equation model, which type of problem will have to face? Comment on the identification status of equation (1) and (2). Which method can be applied for the estimation of equation (1) and equation (2)?