Problem Set 1 - AEM 4150 Price Analysis Fall Semester 2009...

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AEM 4150 Price Analysis Fall Semester 2009 Homework Assignment 1 This assignment is due at the beginning of class on Tuesday, September 8, 2006. Answer all of the following short questions: (a) Explain the difference between an increase in quantity demanded and an increase in demand . (1 point) (b) What happens to the demand curve if there is a decrease in the price of an alternative good, other things being equal ? Illustrate each of the two cases we have studied in class (substitute and complement) with a graph showing what the change in demand does to equilibrium price and quantity and explain your illustration. (2 points) (c) What will happen to the demand curve of a product if there is a decrease in the price of the good in question, other things being equal ? Explain and then illustrate with a graph. (1 point) (d) Define and interpret own price inelasticity, income elasticity and cross price elasticity at a point. (3 points) (e) True or False. Two goods are complements if an increase in the price of one leads
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Problem Set 1 - AEM 4150 Price Analysis Fall Semester 2009...

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