Econ 100A PS1 - Department of Economics University of...

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D e p a r t m e n t o f E c o n o m i c s Spring 2007 University of California, Berkeley Prof. Woroch Economics 100A PROBLEM SET 1 Due: Thursday, February 1, 2007, 8:00 AM (in lecture) I. TRUE or FALSE and EXPLAIN : For each statement below, decide whether it is true or false, and explain the reasoning behind your answer in a few sentences . When appropriate, provide a diagram. 1. If supply of good A shifts to the left while demand of good A shifts to the right, the equilibrium price and quantity increases. 2. As one moves upward along a downward-sloping linear demand curve, the price elasticity of demand decreases. 3. Alisa likes coffee but she hates beer. Her indifference curves representing bundles of coffee and beer have negative slope. 4. If the price of good X and price of good Y change by the same proportion, relative price will be the same and thus the budget constraint will not change. II. SUPPLY-DEMAND ANALYSIS: For each of the follow recent news announcements, deduce the impact of the economic event on the price and quantity in indicated market(s). Sometimes a partial equilibrium analysis will suffice, while on other occasions you will want to follow simple general equilibrium reasoning. 1. Last week’s unusually cold weather in California damaged a large fraction of the citrus crop in the central valley, hitting especially hard the navel oranges: impact on U.S. orange juice market.
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Econ 100A PS1 - Department of Economics University of...

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