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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 Fall '08
 Idson
 Microeconomics, Supply And Demand, demand function, oil demand

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