Homework1.200 - Ryan Oprea Econ 200 Fall 2008 Homework#1...

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Ryan Oprea Econ 200, Fall 2008 Homework #1 This homework is due on October 10 at the beginning of class. You may consult with others on the homework, but must turn in your own work (i.e. please don’t copy homework from others) and must list who you worked with on the homework. Economists must learn to make assumptions. If there is insufficient information to answer a question, state a reasonable assumption that allows you to do so and use it when working through the problem. However, if you make assumptions that are not necessary to solve the problem, you will be penalized in points. Make your reasoning clear. Make sure I understand what you’re doing. I give partial credit for answers that are very well reasoned even if they aren’t exactly right. Numerical answers that are not clear and CIRCLED will be discounted or ignored. 1. (35 points) You are an economics detective. A frantic Senator comes to you one balmy night with terrible news: the market for rocking chairs, a major product in his district, is underperforming. Specifically, the Senator has learned that Total Surplus in the market for rocking chairs has dropped to 1000 (he remembers it being higher before). As you flip open your notepad, he breathlessly informs you that the market is competitive, demand in the market is roughly Q d = 200 - 5 p and supply is about Q s = 3 p . He is worried that the state government is behind the shortfall in surplus. The problem, he explains, is that he has no idea what policy could be causing the problem. He would like you to
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This note was uploaded on 10/26/2009 for the course ECON 200 taught by Professor Oprea during the Spring '09 term at UCSC.

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Homework1.200 - Ryan Oprea Econ 200 Fall 2008 Homework#1...

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