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s06-midterm1-4 - Economics 302 Intermediate Microeconomics...

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Economics 302 Silve Parviainen Intermediate Microeconomics Spring 2006 Midterm Examination I This is a 80-minute exam, with closed books and notes. No calculators allowed. There are four questions in the exam. Each question is worth 25 points. Remember to label your graphs carefully, and show your work. GOOD LUCK! 1 Demand and Elasticity Assume that the demand function for green peas can be expressed as Q d g = 100 - 10 p g - 10 p c + 5 p b , where p g is the price of green beans, p c the price of carrots, and p b the price of broccoli. The supply function of green beans is Q s g = 40 p g - 20 . At the equilibrium, the prices for carrots and broccoli are p c = p b = 2. (a) Calculate the equilibrium quantity and price for green beans. (b) At the equilibrium, is demand for beans elastic or inelastic? Briefly explain how the elasticity shows in consumer behavior. (c) Calculate the cross-price elasticities, and determine if green beans and carrots are demand substitutes or complements. What about green beans and broccoli?
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