This preview shows pages 1–4. Sign up to view the full content.
Midterm 1
Economics 304K: Principles of Microeconomics
Prof. Meg Ledyard
121 pm
50 Min.
Name _____________________
•
You have 50 min for the exam.
There are a total of 100 points.
•
You may NOT use calculators or other aids.
•
You may leave any fractions unsimplified.
•
Please show all of your work on the following pages.
If you need more space, please
use the back.
•
Properly label all graphs.
•
You should have 7 pages including this one.
Please count them to be sure.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document 1. Define the following:
a. (2 points) Equilibrium
b. (2 points) Demand
c. (2 points) Efficiency
2. Consider the perfectly competitive market for peanut butter.
Suppose that from data you
observe that the elasticity of demand for peanut butter is 0.2 and the elasticity of supply for
peanut butter is 4.
a.
(8 points)
Draw a supply and demand diagram (graph) for the market for peanut
butter.
It does not have to be to scale, but it should be representative of the
information given above.
Ppeanut
butter
S
P*
D
Qpeanut
butter
Q*
b.
(8 points) Suppose that you know that the income elasticity of demand for
peanut butter is 4.
You observe that incomes have risen.
Show this change in
the market for peanut butter in a new diagram below.
Explain why you changed
the diagram in the way that you did.
What happens to price and quantity?
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
This note was uploaded on 09/14/2009 for the course ECON 304K taught by Professor Ledyard during the Fall '08 term at University of Texas at Austin.
 Fall '08
 Ledyard
 Microeconomics

Click to edit the document details