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Midterm08Answerkey(posted)

Midterm08Answerkey(posted) - ECON191 ANSWER KEY FOR MIDTERM...

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1 ECON191 ANSWER KEY FOR MIDTERM Part I. Multiple Choices (30 points) 1. E 2. C 3. B 4. E 5. C 6. A 7. A 8. A 9. C 10. D Part II. Problem Solving Questions 11. (20 points) a) Optimal condition: 1 1 x x x y y y MU p p y MU p x p + = = b) Demand function for x : x y p x p y m + = ( ) 1 1 x x y y p p x p x m p + = Therefore, 2 x y x m p p x p + + = Demand function for y : x y p x p y m + = ( ) 1 1 y x y x p p y p y m p + + + = Therefore, 2 x y y m p p y p = Or, you could use the optimal condition derived in Part a: ( ) 1 1 x y p y x p = to derive the demand function. The answer will be same as above. c) The price elasticity of demand for x is:
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