ECON_W3211_PS2

# ECON_W3211_PS2 - Q D = 1 P What price will maximize revenue...

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ECON W3211.002 Intermediate Microeconomics Problem Set 2 Due Monday, September 27, 2010 1. Perloff, Problem 3.11 2. Let Q = AP ± be a demand curve, where A > 0 and ± < 0 . (a) What is the price elasticity of demand? (b) Revenue is the price of a good times the quantity sold of that good, i.e., R = P × Q . Assume A = 1 and ± = - 1 . Let Q s = 4 P be a supply curve. What is the equilibrium price, quantity and revenue? (c) Now suppose that the supply curve shifts to Q s = 4 P - 3 . What is the equilibrium price, quantity and revenue? (d) Recall that
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Unformatted text preview: Q D = 1 P . What price will maximize revenue? 3. Suppose the supply and demand curves for gasoline are given by Q D = 9-1 4 P Q S = 2 P (a) What is the equilibrium price and quantity? (b) What is the price elasticity of demand and supply at the equilibrium? (c) Suppose the government impose a \$0.9/gallon tax on gasoline, paid by buyers. Solve for the new equilibrium. What portion of the tax is is paid by consumers, and what portion by sellers? 1...
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