e360_apks_Midterm1ReviewAns

# e360_apks_Midterm1ReviewAns - Answer Key to Mid Term 1...

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Answer Key to Mid Term 1 Review Andreas Pape, Kai Sun 1 a. Income = 1*a 1 +2*b 1 b. b MRS a,b =1 U 1 U 0 BC a Now her MRS=1, which is not equal to the price ratio (P a /P b =1/2) She can buy more apples and less banana to make herself better off.

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Answer Key to Mid Term 1 Review Andreas Pape, Kai Sun 2. a. p=I-q=10-q (p 10) p 10 6 q 4 The above bold line is the demand curve. P=6 => q=4 b. e = -1*(p/q) At p=6 and q=4, e = -1*(6/4) = -3/2 => elastic Ö If price goes up by 10%, q will go up by more than 10%. c. CS = (1/2)*4*4 = 8
Answer Key to Mid Term 1 Review Andreas Pape, Kai Sun d. e = 1*(10/q) = 10/q At p=6 and q=4, e = 10/4 = 5/2 => elastic Ö If income goes up by 10%, q will go up by more than 10%.

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Answer Key to Mid Term 1 Review Andreas Pape, Kai Sun 3. a. b. P=50 P=35 P=25 P=10 P=0 Tom 0 30 50 80 100 Dick 0 20 60 120 160 Harry 0 0 25 100 150 Total 0 50 135 300 410 c. P 50 40 30 Q H Q Q D Q T Q 100 150 160 d. For p>50, Q=0

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## This note was uploaded on 09/18/2010 for the course ECON 360 taught by Professor Andreaspape during the Fall '08 term at Binghamton University.

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e360_apks_Midterm1ReviewAns - Answer Key to Mid Term 1...

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