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

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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.

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