ECN100B_HW1_solutions

ECN100B_HW1_solutions - ECN 100B Problem Set 1 Q1 Q d =a-bP...

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Unformatted text preview: ECN 100B Problem Set 1 Q1 Q d =a-bP βŽͺ ⎩ βŽͺ ⎨ ⎧ βŽͺ ⎩ βŽͺ ⎨ ⎧ = = β‡’ βˆ’ = βˆ’ = 5 2 44 80 12 100 4 b a b a b a Q d =44- 5 2 P OR use 80 100 12 4 100 4 2 1 2 1 1 1 βˆ’ βˆ’ = βˆ’ βˆ’ β‡’ βˆ’ βˆ’ = βˆ’ βˆ’ P Q P P Q Q P P Q Q Q P 2 5 110 βˆ’ = P D A (4,100) B (12, 80) 12 4 100 80 Q a. equation: Q P 2 5 110 βˆ’ = or P Q 5 2 44 βˆ’ = b. slope: 2 5 βˆ’ No, slope doesn’t change because it’s a linear function c. 10 4 100 5 2 1 βˆ’ = Γ— βˆ’ = = Q P slope Ξ΅ Yes, elasticity changes because the price elasticity is a function of P and Q Q2 Q d =Q s 85-0.4P=55+0.6P P=30 Q d = 85-0.4x30=73 Q s =55+0.6x30=73 Equilibrium price: P=30 Equilibrium quantity: Q=73 Q3 a. Q d =Q s 13.33-0.33Q d = 0.2Q s +10 0.53Q=3.33 Q=6.283 P=13.33-0.33x6.283=11.2566 P=0.2x6.283+10=11.2566 b. P=13.33-0.33Q d 429 . 5 283 . 6 2566 . 11 33 . 1 1 βˆ’ = Γ— βˆ’ = = Q P slope Ξ΅ c. step 1: Original demand: P=13.33-0.33Q d Choose 2 points on this demand function A (1, 13) Q d =1, P=13 B (10, 10.03) Q d =10, P=10.03 =10, P=10....
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This note was uploaded on 03/11/2010 for the course ECN ECN100 taught by Professor Stevens during the Winter '09 term at UC Davis.

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ECN100B_HW1_solutions - ECN 100B Problem Set 1 Q1 Q d =a-bP...

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