2350pqset_1 - YORK UNIVERSITY — ECON2350 — V. BARDIS P...

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Unformatted text preview: YORK UNIVERSITY — ECON2350 — V. BARDIS P A TI E ET 1 . Find the aggregate demand function, X (p), if the demand of person 1 is given by $1 = 50 — p and the demand of person 2 is given by $2 = 25 — (1 / 2);). Is any of the three demands more elasticnthanjhemthersi . Suppose the demand function of person 1 is given by $1 = 50 — p and that of person 2 by x2 = 25 — p. (a) Find each person’s inverse demand function. (b) Find the aggregate demand function, X . (a) Find the aggregate demand function, X (p), in a market with two price—taking consumers: person 1 with income m1 and demand 1'1 2 M1 /p and person 2 with income M2 and demand $2 = M2{3p. (b) Show that the three demands have unitary price elasticity. (c) Find the income elasticity of person 1’s and person 2’s demand. (d) Other things equal, do you expect the price of the good to become lower or higher if we take half the income of person 1 and give it to person 2? . (a) Find the aggregate demand, X (p), in a market that consists of 1000 identical consumers, each with demand 1;,- = 30 — p. (b) Find the aggregate demand, X (p), in a market that consists of 1000 identical consumers, each with inverse demand 1) = 10 — 230,-. . (a) Show that a demand function of the form at = Ap’b has constant elasticity, equal to —b. (b) What inference can you draw about revenue when E) = 1? . (a) Show that marginal revenue is zero when price elasticity is equal to —1. (b) Show that the absolute value of elasticity is equal to 1 at the midpoint of a linear demand cum . Suppose Jenny’s demand is given by q = 10 — 2p. (a) Find the value of her consumer surplus if the price of the good is 2. (b) What is the expression for Jenny’s marginal willingness to pay (MWTP) for this good? (c) Find once again her CS if p = 2 but using M WTP instead. . What is ‘consumer surplus’? Your answer should include an intuitive definition (i.e., in words), a formal definition (in math) and an illustration of the concept on a well—defined diagram. . How many units of good at will the consumer buy if her preferences are U = a: + y, the prices of the goods are pm 2 3 and pg 2 2, and she has M = 6 dollars to spend. . Give an example of a utility function representing ‘quasilinear preferences’. Show that the demand function of the good which appears in the ‘non—linear part’ of this function is independent of income. 11. TRUE OR FALSE: If marginal cost increases with output, then average cost is minimum at the level of output where average cost is equal to marginal cost. 12. Suppose the cost function of each firm in a perfectly competitive industry is given by C(q) = 100 + 10g + q2 (a) What is the ‘short—run’ supply of the firm? (b) What is the ‘long—run’ supply of the firm? (C) What is the supply of the industry in the shortrun if there are n = 200 firms? (d) What is the supply of the industry in the long run? (e) Explain the difference between profit and producer surplus in the short—run and find the value of each if the price of output is 40? 0 Questions From Textbook Chapter 21: 1,2,3 Chapter 22: All Chapter 23: 1, 3, 4, 5, 6, 7 (For answers, please see the textbook.) ...
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This note was uploaded on 12/01/2010 for the course ECONOMICS 2350 taught by Professor Bardis during the Summer '08 term at York University.

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2350pqset_1 - YORK UNIVERSITY — ECON2350 — V. BARDIS P...

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