Problem Set 3

# Problem Set 3 - Microeconomics(Fall 2010 Problem Set 3 Due...

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Microeconomics (Fall 2010) Problem Set 3 Due in class (Monday, October 4) Please submit your answers on a separate sheet(s) of paper with your name, the name of your recitation teacher, and the time of your recitation at the top. 1. Suppose that a consumer’s annual demand for office visits is described by the equation Q = 8 - 0.1 p . If office visits cost \$30, and the consumer has no health insurance (i.e., the consumer pays full price), how many office visits will she make? What is the elasticity of demand for office visits at this point? Suppose a health insurance plan is instituted that pays for one-third of each office visit. How would this affect the quantity and the demand elasticity at the new equilibrium? 2. A consumer faces prices for hot dogs and hamburgers of \$1 each. Consumption of the two commodities at various weekly income levels are shown below. a. Use the information to sketch the income consumption curve on a graph. b. Draw the Engel curves for hot dogs and hamburgers.

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Problem Set 3 - Microeconomics(Fall 2010 Problem Set 3 Due...

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