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Unformatted text preview: ECON W3211.002 Intermediate Microeconomics Problem Set 1 – Solutions 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. This questions is less about substitutes and complements and more about what you think influences the demand for each service. As such, there is no right or wrong answer, but a complete answer will include some additional assumptions and the distinction between a shift in the demand curve and a move along the demand curve. a. The onboard entertainment system on taxicabs is upgraded. An upgrade implies that taxi rides are now more enjoyable, and hence increases demand for taxi rides. Demand for subway rides decreases. Note that these changes are represented by shifts in the demand curve. Note also that this assumes the taxi entertainment system figures into the demand functions of both taxi rides (positively)...
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This note was uploaded on 10/03/2011 for the course ECON W3211 taught by Professor Elmes during the Fall '09 term at Columbia.
- Fall '09