Answer+Key+to+HW1 - Answer Key to Homework#1 2 The demand...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Answer Key to Homework #1 2. The demand curve shifts to the left from D 1 to D 2 by 30%, which is the distance between Q 0 and Q 4 . For supply curve S 2 , the price drops from p 0 to p 1 , a change less than 30%. For a steeper supply curve S 1 , the price decreases to p 2 , a larger decrease, yet still smaller than 30%. Accordingly, the equilibrium quantity changes less than 30% as well. 6. The increase in demand for ethanol has increased the demand for corn, an input in the production of ethanol. The market demand for corn shifts to the right increasing both the equilibrium price and quantity. The increase in price reduces the quantity of corn that is consumed as food. The increase in price induces more farmers to produce corn and increases the demand for agricultural land. See the NY Times article: Ethanol is Feeding Hot Market for Farmland” by Monica Davey August 8, 2007. in 16. The numbers suggest that labor demand is elastic. In the following figure, the supply curve shifts to the right by 11%, yet the decrease in equilibrium wage is only 3.2%. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
18. Use equation 2.28 from the textbook to solve for the change in price. The incidence of a specific tax τ on consumers = dP d η τ ηε = .
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/04/2011 for the course EEP 100 taught by Professor Perloff during the Spring '10 term at Berkeley.

Page1 / 6

Answer+Key+to+HW1 - Answer Key to Homework#1 2 The demand...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online