problemset1[1] - EC201 Fall 2007 Prof Jordi Jaumandreu...

EC201, Fall 2007, Prof. Jordi Jaumandreu
Problem set #1
Demand and Supply, Applications
1. Suppose the demand for processed pork in Canada is Q = 171 − 20 p +
20 p
b
+ 3 p
c
+ 2 Y, where p
b
is the price of beef, p
c
the price of chicken and Y
stands for income. Assume that p
b
= 4 (dollars per kg) , p
c
= 3
1
3
(dollars per
kg), Y = 12 . 5 (thousand dollars) and that the price of beef raises from $4 to
$5 . 2 . How does the demand curve for processed pork shift? Use a diagram to
illustrate the answer.
2. Use the demand of problem 1 together with the supply curve Q = 88+40 p
to show how the equilibrium quantity of pork varies with income.Use a diagram
to illustrate the answer.
3. If the supply of corn by the United States is Q
a
= a + bp and the supply
by the rest of the world is Q
r
= c + ep what is the world supply? Use a diagram
to illustrate the answer.
4. The demand function for a good is Q = a − bp, and the supply function is
Q = c + ep , where a, b, c and e are positive constants. Solve for the equilibrium
price and quantity in terms of these four constants.