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Assignment_1_for_2010

# Assignment_1_for_2010 - VICTORIA UNIVERSITY OF WELLINGTON...

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VICTORIA UNIVERSITY OF WELLINGTON SCHOOL OF ECONOMICS AND FINANCE ECON201 2010 ASSIGNMENT 1 Supply and Demand, Elasticities, Preferences and Utility Functions This assignment is not assessed, but you must prepare your answers in writing and bring them to tutorial for discussion. You may be asked at random to answer any of these questions for the class. 1. (Perloff Chapter 2, Problem 25) The demand function for movies is p Q - = 120 1 for college students and p Q 2 120 2 - = for other town residents. What is the town’s total demand function? 2. Consider the following demand and supply relationships in the market for golf balls: C P Q d 2 2 90 - - = and R P Q s 5 . 2 5 9 - + - = , where C is the price of golf clubs and R is the price of rubber. a. If R = 2 and C = 10, calculate the equilibrium price and quantity of golf balls. b. At the equilibrium values, calculate the price elasticity of demand and the price elasticity of supply. c. At the equilibrium values, calculate the cross price elasticity of demand for golf balls with respect to the price of golf clubs. What does the sign of this

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