Fr2_soln - UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF BUSINESS EWMBA 201A-Economic Analysis for Business Decisions Fall 2007 Professor Catherine

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UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF BUSINESS EWMBA 201A—Economic Analysis for Business Decisions Fall 2007 Professor Catherine Wolfram Final Review Questions: Whole Course 1. Is space to park a car scarce in downtown San Francisco? Is it likely to be scarce in downtown Laramie, which is a small, isolated town in Wyoming? How would you tell? Space to park a car is scarce in San Francisco because you have to pay to park. Certainly there is not as much parking as people would like at a price of zero. It is much less likely to be scarce in downtown Laramie. In particular, if the price of parking is zero in Laramie, then it is not scarce, especially if there are generally available spaces to park. Note that shortage, or the fact that people in San Francisco can’t find parking even if they are willing to pay the going market price, is not scarcity.
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EWMBA 201a Fall 2007—Prof. Wolfram 2. In the US, couples traditionally give each other gifts on Valentine’s Day (February 14), especially roses. The week leading up to February 14 is the period of highest wholesale demand for roses (namely, the demand of flower shops buying from growers). This period is also the period of highest wholesale prices during the year. In order to produce a large volume of roses near Valentine’s Day, growers use various techniques to force the blossoming of roses that might otherwise bloom too late. While wholesale prices are highest in the week preceding Valentine’s Day, they are almost as high in the second half of February (after Valentine’s Day), as they are in the week leading up to Valentine’s Day. Explain why wholesale prices for roses would be high after Valentine’s Day. (Your explanation should include a supply and demand graph, but you should explain in words what any graphs show.) After Valentine’s Day, high prices would not be the result of high demand for roses. Instead the reason is decreased supply.
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This note was uploaded on 09/21/2009 for the course EWMBA 201A taught by Professor Wolfram during the Fall '07 term at University of California, Berkeley.

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Fr2_soln - UNIVERSITY OF CALIFORNIA HAAS SCHOOL OF BUSINESS EWMBA 201A-Economic Analysis for Business Decisions Fall 2007 Professor Catherine

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