practice 2009 midterm 1 answer guide

practice 2009 midterm 1 answer guide - ARE100a Midterm 1...

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ARE100a Midterm 1 Oct 30, 2008 Sumner ARE100A INTERMEDIATE MICROECONOMICS: THEORY OF PRODUCTION AND CONSUMPTION FALL QUARTER 2009 Practice Midterm 1 Answer guide 1. California-produced peaches are bought in California where the demand curve is Q cc = a - 50P + Y c . They are also bought in the rest of the United States where the demand curve is Q cr = c - 150P + Y r . At a 2008 incomes Q cc = 400 and Q cr = 600 for the price of $2. What is the overall elasticity of demand facing the California peach producing industry? Explain. Total demand is horizontal sum of two markets (PS 2 and chapter 2): Q ctotal = a+c –200P + Y dQ/dP = -200; P/Q = 2/1000 . elasticity of demand (dQ/dP)(P/Q) = -200(2/1000) = -0.4 2. You spend your income on food and college courses. The income elasticity of food is 0.4 and the share of income spent on food 0.5. The substitution only, real income constant, compensated demand elasticity for courses is -1.0. You initially planned to purchase 10 courses this year. a. If your income goes up by 25 percent how many more courses would you purchase?
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practice 2009 midterm 1 answer guide - ARE100a Midterm 1...

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