ARE100A+Q1+answer+2009

ARE100A Q1 answer 20 - 2 Draw a representative budget constraint for a person with a budget of 10 hours of free time per week who only reads books

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ARE100A INTERMEDIATE MICROECONOMICS: THEORY OF PRODUCTION AND CONSUMPTION FALL QUARTER 2009 Quiz 1 Answer guide Thursday October 8 1. Consider the effect on price of a $20 per ton subsidy on peaches when the supply elasticity is 2.0 and the demand is completely inelastic. Demand is vertical so quantity does not change. Subsidy shift down effective supply curve (lower net cost of suppliers). The price to buyers falls by the full $20 per ton. The supply elasticity is irrelevant.
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Unformatted text preview: 2. Draw a representative budget constraint for a person with a budget of 10 hours of free time per week who only reads books or listens to recorded symphonies. Reading takes 5 hours per book and listening takes one hour per symphony. The budget line is a straight line between the two points 10/1 on the symphony axis and 10/5 on the books axis. If symphonies are on the vertical axis the line goes from 10 to 2 and the slope is equal to -5....
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This note was uploaded on 04/20/2010 for the course ARE 100A taught by Professor Constantine during the Fall '08 term at UC Davis.

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