Question1.3 (1 mark) In a supply-demand system, price is endogenous because: Select one alternative: It is determined simultaneously with quantity It is measured with error It is fixed It is exogenous ResetMaximum marks: 1 Flag question undefined单项选择题
A
It is determined simultaneously with quantity
B
It is measured with error
C
It is fixed
D
It is exogenous

Question

Question1.3 (1 mark) In a supply-demand system, price is endogenous because: Select one alternative: It is determined simultaneously with quantity It is measured with error It is fixed It is exogenous ResetMaximum marks: 1 Flag question undefined单项选择题

A

It is determined simultaneously with quantity

B

It is measured with error

C

It is fixed

D

It is exogenous

BlackTom AI · Accepted Answer

Price in a supply–demand model is endogenous because it is determined simultaneously with quantity through the intersection of the supply and demand equations.

Relevant concepts:
- Endogenous variables are those whose values are determined within the model; exogenous variables are given from outside the model.
- A market equilibrium is found where quantity demanded equals quantity supplied; both price (P) and quantity (Q) are solved from the system of equations simultaneously.

Step-by-step reasoning with algebraic demonstration:
1. Write the standard linear demand and supply functions:
   Qd = a − bP  (demand)
   Qs = c + dP  (supply)
2. At equilibrium Qd = Qs, so set them equal:
   a − bP = c + dP
3. Solve for P:
   a − c = bP + dP
   a − c = (b + d)P
   P* = (a − c) / (b + d)
   This expression shows P* is derived from parameters of both demand and supply — it is not imposed from outside.
4. Solve for equilibrium quantity Q* by substituting P* back into either equation:
   Q* = a − bP* (or Q* = c + dP*)
   Thus Q* is also determined by the same system.

Why the correct answer is correct:
- Because price P* results from simultaneously solving demand and supply, it is endogenous to the model.

Why the other options are incorrect:
- "It is measured with error": Measurement error describes data quality, not whether a variable is determined inside the model.
- "It is fixed": A fixed variable does not change with market conditions; price in a competitive market adjusts to clear the market.
- "It is exogenous": Exogenous variables are set outside the model; price is not set externally in this basic supply–demand framework.

Conclusion: The correct answer is "It is determined simultaneously with quantity," which matches the provided answer.

Question1.3 (1 mark) In a supply-demand system, price is endogenous because: Select one alternative: It is determined simultaneously with quantity It is measured with error It is fixed It is exogenous ResetMaximum marks: 1 Flag question undefined单项选择题

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