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Solutions_ec201midte - EC201 Fall 2007 Prof Jordi Jaumandreu Midterm 1 October 11 There are four problems which you have to solve The problems have

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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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1 .(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.

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Solutions_ec201midte - EC201 Fall 2007 Prof Jordi Jaumandreu Midterm 1 October 11 There are four problems which you have to solve The problems have

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