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Quiz 2 Ec21 S2015.pdf

Quiz 2 Ec21 S2015.pdf - Dartmouth ID(not name Economics 21...

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Page 1 of 10 Dartmouth ID ( not name): ___________________________ Economics 21 Spring 2015 Quiz 2 Instructions: Show all your work! (no credit for correct answers unless the intermediate steps are shown) You can earn 45 points in total. All items (including the axes) in a graph need to be labeled to get full credit There are two pages at the end in case you need additional space Do not remove the staple or tear out pages Books, notes, your own calculators or cell phones are not allowed. You are only allowed to use the calculator provided by me. Good luck!
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Page 2 of 10 1. Short Answer Questions (21 points) a. [10 points!] Suppose the income elasticity of demand is 2. At an income of $2,000, the quantity demanded is 50 units. At which level of income will the quantity demanded be 54? As always, show how you arrived at your answer. No credit for correct answer if you don’t show how you arrived at it. b. As you know, Dartmouth is moving forward with a new housing policy based on residential communities. What to you personally is the equivalent variation of this new policy? Explain how you arrived at your answer using the definition of equivalent variation. c. Draw an Engel curve for an inferior good. Give values to two points on the curve: specify a number on the X-axis and the on the Y-axis for two points on the Engel curve. Be sure to label the axes (as always).
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Page 3 of 10 d. Ganiru’s indifference curves for Munchkins (M) and Coffee (C) are given in the figure below. If he
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