Microecon_ps2_fall2011

Microecon_ps2_fall2011 - Department of Economics Columbia...

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Department of Economics W3211 Columbia University Fall 2011 Probl e m S e t 2 Int e rm e diat e Mi c ro ec onomi c s Prof . S e yhan E Arkona c 1. Suppose that a consumer’s annual d emand for office visits is described by the equation Q 8 0.1 p . If office visits cost $30, and the consumer has no health insurance (i.e., the consumer pays full price), how many office visits will she make? What is the elasticity of demand for office visits at this point? Suppose a health insurance plan is instituted that pays for one-third of each office visit. How would this affect the quantity and the demand elasticity at the new equilibrium? 2. A consumer faces prices for hot dogs and hamburgers of $1 each. Consumption of the two commodities at various weekly income levels is shown below. a. Use the information to sketch the income consumption curve on a graph. b. Draw the Engel curves for hot dogs and hamburgers. Income Hot Dogs Hamburgers $10 3 7 15 6 9 20 10 10 c. What is the income elasticity of hot dogs for this consumer as income increases from $10 to
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This note was uploaded on 01/16/2012 for the course ECON W3211 taught by Professor Elmes during the Fall '09 term at Columbia.

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Microecon_ps2_fall2011 - Department of Economics Columbia...

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