Econ 371 Chapter 2 Homework
Due: August 31, 2007
Please answer all Questions in the space provided.
The following supply and demand functions summarize the market for domestic
automobiles:
A
600
i
000
,
000
,
1
Pop
000
,
20
I
200
P
210
P
500
Q
i
000
,
000
,
1
E
000
,
125
S
750
,
13
W
000
,
100
P
400
P
000
,
2
Q
x
d
SUV
s
+

+
+
+

=





=
For the supply equation,
P
is the average price of new cars,
P
SUV
is the average
price of new sport utility vehicles (in $),
W
is the average hourly price of labor
(wages in $ per hour),
S
is the average cost of steel per ton ($),
E
is the average
cost of energy ($per mcf natural gas),
i
is the average interest rate (cost of capital
in percent).
For the demand equation,
P
is the average price of new cars,
P
x
is the average
price for new import luxury cars,
I
is disposable income,
Pop
is population
(millions),
i
is the average interest rate on loans (percent) and
A
is industry
advertising expenditures (millions).
a.
List the Exogenous Variables?
The exogenous variables are
P
SUV
. W, S, E, I,
P
x
, I, Pop,
,i A,
b.
List the endogenous Variables?
The endogenous variables are P and Q