ECON_W3211_PS1 - ° ± ¶·¸¹º = 34 − 2 ² 20 ² ³...

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ECON W3211.002 Intermediate Microeconomics Problem Set 1 Due Monday, September 20, 2010 5 points each item 1. Consider public transportation options in New York City, in particular taxicabs and the subway system. Explain how the following events would affect the market demand for cab rides and subway rides (separately), everything else held constant. a. The onboard entertainment system on taxicabs is upgraded. b. The price of a single ride on the train increases by $0.25. c. The price of gasoline increases. d. Weekend service changes on the subway lessen in frequency. e. There is a sudden downpour. 2. Represent the following demand function as a demand curve for each of the three cases. 𝑄 𝑑 = 100 5 𝑝 + 7 𝑝 𝑠 − 𝑝 𝑐 + 8 𝑦 a. 𝑝 𝑠 = 1 , 𝑝 𝑐 = 9 and 𝑦 = 20 b. 𝑝 𝑠 = 4 , 𝑝 𝑐 = 4 and 𝑦 = 22 c. 𝑝 𝑠 = 7 , 𝑝 𝑐 = 32 and 𝑦 = 50 3. Karen and Pete have the following individual demand functions for good X:
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Unformatted text preview: ° ± ¶·¸¹º = 34 − 2 ² + 20 ² ³ − 3 ² ´ + 5 µ ¶ ° ± »¹¼¹ = 18 − 3 ² + 10 ² ³ − ² ´ + 2 µ » Everyone else has the demand function ° ± = 0 . There is only one substitute for X, and it sells at a price of ² ³ = 3 . There is also just one complement, with price ² ´ = 4 . Karen’s and Pete’s income levels are µ ¶ = 30 and µ » = 50 . Draw the market demand curve. 4. Suppose the suppliers of good X in question 3 face an aggregate supply function of ° ³ = 300 + 15 ² − 5 ½ − 2 ¾ − 3 ¿ Suppose further that the suppliers face a wage bill of ½ = 1 , the interest rate is ¾ = 5 and raw materials cost ¿ = 3 . How many units of good X will be sold in equilibrium?...
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