Hints for Economics 452 Problem Set Three

Hints for Economics 452 Problem Set Three - Hints for...

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Hints for Economics 452 Problem Set Three Work on each question as we complete that portion of chapter 9 (after practicing on corresponding exercise) so do not put it all off until just before due. Do a rough draft first, then copy more neatly to version you turn in. Write your solutions neatly on a printout of the questions and staple pages together before turning in your problem set. 1&2. See Example 9.1 Import Demand (slides 7-8) and Example 9.2 Export Supply and World Equilibrium (slides 16-20). 1a&2a. Remember to start by rearranging demand and supply to be in terms of quantity demanded and quantity supplied. Check that the price intercepts of import demand and export supply match Home and Foreign’s autarky prices (1c and 2c). As a rule of thumb, Home autarky price (1c) should turn out to be halfway between the price intercepts of Home demand and supply, and similarly for foreign’s autarky price (2c). World free trade price (2d) should turn out to be halfway in between Home and Foreign’s autarky prices (1c and 2c).
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