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In our example, there are three exogenous variables (I, Py, and W) and three endogenous variables: Px, Qdx , and Qsx .

Hence, we have a system of two equations and three unknowns. We need another equation to solve this system. That equation is called the equilibrium condition , and it is simply Qdx=Qsx .
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3.6. Market Equilibrium
e of the demand and supply model of this particular market. Because of that, they are called exogenous variables . Price and quantity, however, are determined within the model for this particular market and are called endogenous variables . <span>In our simple example, there are three exogenous variables (I, P y , and W) and three endogenous variables: P x , Qdx , and Qsx . Hence, we have a system of two equations and three unknowns. We need another equation to solve this system. That equation is called the equilibrium condition , and it is simply Qdx=Qsx . Continuing with our hypothetical examples, we could assume that income equals $50 (thousand, per year), the price of automobiles equals$20 (thousand, per automobile), and