Econ301_hw1 - Econ 301 - Problem Set #1 Due on Friday, Jun...

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Econ 301 - Problem Set #1 Due on Friday, Jun 18, 2010 1. Suppose demand D for a good is a linear function of its price per unit, P. When price is $10, demand is 200 units, and when price is $15, demand is 150 units. Find the demand function. 2. Suppose that demand for pizza is Q = 1000 - 20 P +10 P x - 5 P z +10 Y , where P is the price of a pizza, P x and P z are the prices of some other goods X and Z, and Y is income. Answer the following questions assuming that P = 100 , P x = 50 , P z = 200 , Y = 800 . (a) What is the quantity Demanded? (b) Are pizza and goods X complements or substitutes? (c) Are pizza and goods Z complements or substitutes? (d) What is the price elasticity of demand (Show work)? (e) Use the number you calculated in (1.d) in a clear concise sentence explaining what that number means. (f) Based on your answer to (1.d), is demand elastic or inelastic at the given prices and income?
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This note was uploaded on 08/01/2011 for the course ECON 301 taught by Professor Corinnelanginier during the Summer '07 term at Iowa State.

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