MECON PS1 sol

MECON PS1 sol - Microeconomics 100A Problem Set 1 Solutions...

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Microeconomics 100A Problem Set 1 Solutions Due January 20, 2010 Professor Michael Noel University of California San Diego 1. Imagine the demand function for oranges for consumer i is given by Q i d = 100 – 10p 0 + 2p G + 4p A . + Y i . The current price of oranges, p 0 , is 1. The current price of a bag of grapes p G is 1, the current price of an apple p A is 1. Income is currently 20. a. How much is quantity demanded for consumer i at current prices? 116 = d i Q . b. Calculate the (2D) inverse demand curve for oranges, i.e. p 0 as a function of Q i d , holding all other prices and income equal to their current values. Draw this in a 2-D diagram with Q on the horizontal axis and p 0 on the vertical. What is the slope of the inverse demand curve? The inverse demand curve is given by 2 4 . 0 2 . 0 10 10 0 + + + - = d i Q p , which has slope - 0.1. c. Write down the (2D) demand curve Q as a function only of p G , holding all other prices and income equal to their current values. Draw this as an inverse demand curve with Q on the horizontal and p G on the vertical, holding other prices and income fixed at current values. What is the slope of this inverse demand curve? The demand curve is given by Q i d = 100 – 10 + 2p G + 4 + 20. The inverse demand curve is given by 10 2 5 2 50 - - + + - = d i G Q p , which has slope 0.5.
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d. Write down the (2D) demand curve Q as a function only of p A , holding other prices and income fixed at current values. . Draw this inverse demand curve with Q on the horizontal and p A on the vertical. What is the slope of this inverse demand curve? The demand curve is given by Q i d = 100 – 10 + 2 + 4p A + 20. The inverse demand curve is given by 5 5 . 0 5 . 2 4 25 - - + + - = d i A Q p , which has slope 0.25. e. Write down the (2D) demand curve Q as a function only of Y, holding all prices and fixed at current values. . Economists like to call this an “Engel curve”. Draw this Engle curve with Q on the horizontal and Y on the vertical. What is the slope of this inverse Engel curve?
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The Engel curve is given by Q i d = 100 – 10 + 2 + 4 + Y i . The slope of the inverse Engel curve is 1. f. Imagine consumer i gets a raise and her income rises to 30. Write down the new (true) demand function for oranges, i.e. Q as a function of all prices and income. Now that income has increased, has this (true, 5D) demand function shifted to the left or to the right? The demand function for oranges for consumer i is given by Q
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This note was uploaded on 11/27/2011 for the course ECON 100A taught by Professor Staff during the Winter '08 term at UCSD.

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MECON PS1 sol - Microeconomics 100A Problem Set 1 Solutions...

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