Economics 201, Section 005: Take-Home Test (10% of the course mark) Professor J. Cuenca Fall 2011 This Take-Home Test is due in class on Tuesday, Oct 4. It should be submitted in stapled sheets of paper with the student's LAST NAME ONLY (IN CAPITALS) and initials on the top right corner of the FIRST PAGE; and the student's number on the top right corner of each subsequent page. Only one of the questions will be marked. Zero marks will be given unless every single step is clearly indicated. Students who find the problems difficult are strongly advised to seek help from the Professor during his office hours. 1. Suppose that demand for sardines is a function of both the price of sardines and the price of meat. The price elasticity of demand for sardines is 2 (in absolute terms) and the cross elasticity of demand for sardines is 3. The price elasticity of supply of sardines is zero, and the price of sardines is $5 per unit. If the price of meat goes up by 10%: (a) In what direction will the demand curve for sardines shift? (b)
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