PS1_Solutions - AEM 4150 PRICE ANALYSIS Fall 2008 Problem...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set #1 Suggested Solutions 1. (a) An increase in supply refers to a shift in the supply curve to the right. Whereas, an increase in the quantity supplied refers to a movement along the supply curve (i.e., an increase in price results in an increase in the quantity supplied. (b) Nothing happens to the demand curve. A decrease in the price will result in a movement along the demand curve (down). Thus, quantity of the product demanded will increase. (c) If the alternative is a substitute , demand will shift back (to the left) and both price and quantity decrease. If the alternative is a complement , demand will shift to the right and both price and quantity will increase. Substitute: Complement: (d) A good is own price elastic if, given a 1% change in the price of the good, the quantity demanded of that good changes by more than 1%. A good is own price inelastic if for a 1% change in the price of that good, the quantity demanded of the good changes by less than 1%.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 02/20/2009 for the course AEM 4150 taught by Professor Kaiser,h.m. during the Fall '07 term at Cornell University (Engineering School).

Page1 / 3

PS1_Solutions - AEM 4150 PRICE ANALYSIS Fall 2008 Problem...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online