PRSET_1eco111spring2008

# PRSET_1eco111spring2008 - ECO111 Takehome Problem Set #1 1....

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ECO111 Takehome Problem Set #1 Page 1 1. The following table contains data on the relationship between saving and income. Rearrange these data into a meaningful order and graph them on the accompanying grid. What is the slope of the line? The vertical intercept? Interpret the meaning of both the slope and the intercept. Write the equation which represents this line. What would you predict saving to be at the \$12,500 level of income? Income (per year)` Saving (per year) \$15,000 0 10,000 5,000 20,000 \$1,000 -500 500 0 1,500 2. Suppose that C = a + bY , where C = consumption, a = consumption at zero income, b = slope, and Y = income. a. Are C and Y positively related or are they negatively related? b. If graphed, would the curve for this equation slope upward or downward? c. Are the variables C and Y inversely related or directly related? d. What is the value of C if a =10, b =.50, and Y = 200? e. What is the value of Y if C = 100, a = 10, and b = .25? 3. What effect will each of the following have on the demand for small automobiles such as the Mini Cooper and Smart car? a. Small automobiles become more fashionable. b. The price of large automobiles rises (with the price of small autos remaining the same). c. Income declines and small autos are an inferior good. d. Consumers anticipate the price of small autos will greatly come down in the near future. e.

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## This note was uploaded on 03/30/2008 for the course ECO 111 taught by Professor Prof.kara during the Spring '08 term at West Chester.

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PRSET_1eco111spring2008 - ECO111 Takehome Problem Set #1 1....

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