HW7S_302 - Econ 302- Solution to 7th Problem Set Spring...

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Spring 2010-Ali Toossi Due: Tuesday, March 16 in the review session Answer to question 2. Unlike salt, education at a large private university has a large income effect. Answer to question6. Vertical summation would mean that each good could be jointly consumed. Horizontal summation means each person consumes their commodity and excludes others from it. Answer to question14. The demand for tennis balls is elastic. When its price goes up, the total expenditure on the balls goes down. Thus, the share of income available for tickets increases. Since their price is constant, he consumes more tickets. Answer to problem 4 First solve the demand curve for Q and multiply the result by 10. Then solve back in terms of P to get P = 101 – Q for the market demand. At price $1/cup the individual consumes 10 cups and the market consumes 100 cups. Price 101 10.1 101 Cups Answer to problem 5 a) P=10, Q=100; So elasticity = (P/Q)(1/slope) = (10/100)[1/(-0.5)] = -0.2
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HW7S_302 - Econ 302- Solution to 7th Problem Set Spring...

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