Qns.docx - Imagine an agricultural market(oranges in which...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Imagine an agricultural market (oranges) in which we have year to year data on price and output. We know that demand and supply are linear: (A) (10 points) Derive the equilibrium price and quantity functions (B) (B) (10 points) The econometricians tell us that: ? 0 = 100 , ? 1 = −4 , ? 0 = 0, ? 1 = ? , with R varying from year to year with weather conditions. Derive the equilibrium price and quantity functions in this special case. (C) (5 points) Prove that, as R varies, the equilibrium values of P and Q trace out (‘Identify”) the demand curve (not the supply curve). A consumer faces a standard 2-good purchasing environment, say X and Y, with fixed prices ( ?? and ?? ) and fixed income I. She has the (twice differentiable) utility function with the usual properties that “more is better” and the marginal rate of substitution diminishes in X. (A) (15 points) Illustrate graphically the individual’s optimal choice of X and Y in this two good world. Explain briefly what you are doing. Be sure to define all concepts used.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern