Problem set 1

# Problem set 1 - Microeconomics 100A Problem Set 1...

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Microeconomics 100A Problem Set 1 Due September 29, 2010 (Solutions Posted October 1, 2010) Professor Michael Noel University of California San Diego 1. Imagine the demand function for oranges for consumer i is given by Q i d = 100 – 10p 0 + 2p G + 4p A . + Y i . The current price of oranges, p 0 , is 1. The current price of a bag of grapes p G is 1, the current price of an apple p A is 1. Income is currently 20. a. How much is quantity demanded for consumer i at current prices? b. Calculate the (2D) inverse demand curve for oranges, i.e. p 0 as a function of Q i d , holding all other prices and income equal to their current values. Draw this in a 2-D diagram with Q on the horizontal axis and p 0 on the vertical. What is the slope of the inverse demand curve? c. Write down the (2D) demand curve Q as a function only of p G , holding all other prices and income equal to their current values. Draw this as an inverse demand curve with Q on the horizontal and p G on the vertical, holding other prices and income fixed at current values. What is the slope of this inverse demand curve? d. Write down the (2D) demand curve Q as a function only of p A , holding other prices and income fixed at current values. . Draw this inverse demand curve with Q on the horizontal and p A on the vertical. What is the slope of this inverse demand curve? e. Write down the (2D) demand curve Q as a function only of Y, holding all prices and fixed at current values. . Economists like to call this an “Engel curve”. Draw this Engle curve with Q

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Problem set 1 - Microeconomics 100A Problem Set 1...

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