# homework1 - John Russo EC301 September 8, 2008 Homework #1...

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John Russo EC301 September 8, 2008 Homework #1 1) a) . 208 8100 * . = . 1 88 3 93 The real price has decreased from \$3.93 in 1980 to \$2.52 in 2000. b) . - . . = - . % 2 52 3 933 93 35 9 The percentage change in real price from 1980 to 2000 is a decrease of 35.9%. 2) 3) Long run elasticity of demand varies from short run elasticity of demand because if there is a sharp increase in price on a product that isn’t a necessity people are not going to purchase it right away. In the instance of the paper towels and TVs, the television is the durable good. The price elasticity will be greater in the long run because people will eventually learn to use less paper towels. The price elasticity of demand for the TVs is the opposite due to its durability. TVs are going to be less elastic in the long run. 4) a) b) The policy of setting rent at \$700 maximum will benefit students who were willing to pay \$900 will have a consumer surplus of \$200. It will not necessarily benefit all students because some will not even pay the \$700. There would also be a problem with excess

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## This note was uploaded on 09/16/2008 for the course ECON 301 taught by Professor Matraves during the Fall '08 term at Michigan State University.

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homework1 - John Russo EC301 September 8, 2008 Homework #1...

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