1) Suppose the following equations represent a supply and demand model for bubble tea. Qs = 100 + 30P - 10T
Qd = 200 - 20P + 5W
Qd = Qs (equilibrium condition)
Where Qs is quantity supplied, P is the price of bubble tea, T is the price of tapioca that goes in bubble tea, Qd is quantity demand, and W is the weather (in degrees Fahrenheit).
a) In this model, briefly explain whether you think W is exogenous or endogenous and why.
b) P is endogenous in this model but T is exogenous. Briefly explain why.
c) Suppose someone comes to you and says that really T = 5 + P + 2Qs. If you add this equation to your model, is T still exogenous? Briefly explain.