EEP_162_PROBLEM_SET_1 - (E) If you were hired as a...

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EEP 162 PROBLEM SET # 1 Spring 2007 Due in Lecture on Monday, Feb 12, 200 7 Question #1 (A). Why is the industrial demand for water said to be a “derived” demand? (B) What is the difference between the conditional and unconditional demands for water? Which of them would you expect to generate a larger own-price elasticity of demand, and why? How about the relative sizes of cross-price elasticities of demand? (C) Is it necessarily true that, as the price of an input rises, less of it is demanded by the firm (i) holding output constant, or (ii) allowing output to vary? In either case could it happen that there is no change in the demand for the input? (D) What is the difference between the long- and short-run conditional demands for water? Which of them would you expect to generate a larger own-price elasticity of demand, and why? How about the relative sizes of cross-price elasticities of demand?
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Unformatted text preview: (E) If you were hired as a consultant to predict industrial demand for water in Southern California by 2008, which type of demand function would you employ, and why? Question #2 What, if anything, is wrong with the input requirements approach to forecasting the industrial demand for water? Are there circumstances under which it would be reasonable, at least as an approximation? Question #3 (A) What are some of the ways in which changes in regulations could affect the demand for water in an industry? (B) What are some of the ways in which technical change could affect the demand for water in an industry? (C) What are some of the practical implications for water policy of an empirical finding that water and capital are complements or substitutes? Which does the empirical evidence actually suggest?...
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This note was uploaded on 08/01/2008 for the course ECON 162 taught by Professor Hanemann during the Spring '07 term at University of California, Berkeley.

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