midterm1-key - E CON 100A - 1ST MIDTERM 2 1. D EFINITIONS A...

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2 ECON 100A - 1ST MIDTERM 1. DEFINITIONS Answer the following questions in five or fewer sentences. a. What can you say about the income elasticity of demand for a normal good? of an inferior good? You may use the definition of income elasticity of demand in your reply. [5] - 6Q. t ~. <0 61 Q b. What is consumer surplus? Explain in words and using a graph. (Remember to label the axis. Graphs without labels or with the incorrect labels will receive no points). [5] c (O'\~\<1 M{(' S LA f, Lu '> IS, {ht J JYlr-{A ({ bt {""'{i/\ itt fr i'l\. f ~;J \If\ J {A ( l 0.0 <, lHh u: (5, \tv : ll. ff'~r" t ~ ~ io fPtJ C1~l J{Mo.,J C\~rv{) for ~ j (i(l J
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ECON 100A - 1ST MIDTERM 3 2. SUPPLY AND DEMAND Much of the demand for American popcorn comes from Bolivia (not really). In 1995, the total demand for popcorn was Qtotal = 1500 -HOP; of this, the Bolivian demand was Qbolivia = 1000 - BOP. The domestic supply was Qsupply = 1000 + 140P. Suppose Bolivian demand increases by 50% and domestic demand decreases by 50%. a. What is domestic demand curve, Qdomestic, before the change? (Assume that total demand is composed of Bolivian demand and domestic demand.) [3] 'ib{~1 J~JVl'Aj ~,\j K Lv .• , QJvM~i,'Z\<;OO ~ \IOP - 0 0 00 -gop) :: SOo -~Of> b. Before the change in demand, what was the equilibrium price? [5] \(,00- \\Op -~ \\)00-+ l~OP :=::> p -- L c. After the change in demand, what was the new total demand curve, Q~~:I? [5]
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ECON 100A -1ST MIDTERM 4 d. What is the new equilibrium price (you may leave your answer as a fraction)? [5] 11 So - Is ~ P -.: \000 + I~OP -> e. In no more than 3 sentences, interpret your answer to (d). [2] I~ I . l ; 1\ U { t\.'~i. (1\ Qo l"v.' C{I\ J ~M~" J \vLl) b J f.1'f(J~!J1 10 )~/ft {(t {ot~\ J{~(\IIJ c urV{ 40 -f4L 'tjJi ~ ~( 1{J~j( J O 'l1 t ~(, '( ~ {fV\"rd jt:u'(~~{J .
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ECON 100A - 1ST MIDTERM 5 3. UTILITY MAXIMIZATION AND BUDGET SET Pedro has a job that requires him to travel constantly between San Francisco and Los Angeles. He
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midterm1-key - E CON 100A - 1ST MIDTERM 2 1. D EFINITIONS A...

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