EC_315_Review_Problems 2_

EC_315_Review_Problems 2_ - EC 315 Review Problems 2 David...

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EC 315 Review Problems 2 David C. Wong April 3, 2009 Midterm 2 covers the following material: Chapter 3 up to p. 95 and Chapter 4. 1. Do problem 2 on p.110 of the textbook. 2. Do problem 3 on p. 110 of the textbook. 3. Do problem 4 on p. 111 of the textbook. 4. Management at El Grande Tacos has completed a study of weekly demand for its “old-fashion” tacos in 53 regional markets. The study revealed that Pop A P P Q o 55 8 . 0 800 1200 400 + + + - = , where Q is the number of tacos sold per store per week, A is the level of local advertising expenditure (in dollars), Pop denotes the size of the local population (in thousands), and o P is the average taco price of local competitors. For the typical El Grande’s outlet, 50 . 1 $ = P , 00 . 1 $ = o P , 000 , 1 $ = A , and 40 = Pop . (a) Calculate the weekly sales of tacos for the typical El Grande’s outlet. (b) What is the current own-price elasticity of demand for El Grande’s tacos? (c) What is the cross-price elasticity of demand for El Grande’s tacos?
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