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EC201, Fall 2007, Prof. Jordi Jaumandreu
Midterm 1, October 11
There are four problems which you have to solve. The problems have
f
ve
questions each and the number of points that each question is worth is detailed.
Take these numbers as a guide to how long you should spend on a question.
Be sure that you write everything (diagrams, calculations and explanations)
in the allocated space. A solution without the corresponding calculations will
not be given any credit. Graphs without the associated explanations will only
be given partial credit. Answers should be precise and concise. Clarity of
exposition will be taken into account.
1
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.(20pts)Demandinamarketforaprocessedfoodisknowntobe
Q
D
=
10
−
2
p
and supply is given by
Q
S
=5+3
p
a. (5 pts) Calculate the equilibrium price and quantity. Illustrate with
a diagram.
10
−
2
p
=5+3
p
and, solving,
p
=1
,Q
=8
.
b. (3 pts) Calculate the elasticity of demand with respect to price at
the equilibrium.
ε
=
p
Q
∆
Q
∆
p
=
1
8
(
−
2) =
−
0
.
25
c. (3 pts) Calculate the elasticity of supply with respect to price at
equilibrium.
η
=
p
Q
∆
Q
∆
p
=
1
8
3=0
.
375
For the following questions take into account the additional information that
the demand intercept
10
is given by
4+0
.
5
Y,
i.e.
Q
D
=4+0
.
5
Y
−
2
p
, where
Y
=12
.
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This note was uploaded on 07/16/2009 for the course EC 201 taught by Professor Idson during the Fall '08 term at BU.
 Fall '08
 Idson
 Microeconomics

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