Spencer Lane
Econ 101
10966400
Homework 4
1A.
E
= %
∆
Q
[(q^2q^1)/.5(q^2+q^1)]100
%
∆
P
[(p^2p^1)/.5(p^2+p^1)]100
E
= [(3020 )/.5(30+20)]100
[(612)/.5(6+12)]100
E= 0.6
B.
%
∆
TR=%
∆
P+%
∆
Q
If
TR decreases for example .5
but the percent price increases for example +1 then the
percent quantity would have to decrease to 1.5. The value of quantity (1.5) is greater
then the value of price (1), which makes the demand, curve elastic.
C. If
%
∆
TR is 3% and %
∆
P is 10% the %
∆
Q would have to be +7.
7 is the %
∆
Q in CE equilibrium.
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2%= (%
∆
Q)/1
Multiply by 1 to get rid of the fraction to get that %
∆
Q is 2% and elastic.
2=(%
∆
Q)/5
Multiply by 5 to get rid of the fraction to get that %
∆
Q is 10% and elastic.
E.
E
= %
∆
Q
%
∆
P
.4= (20)/%
∆
P
=>
.4 =
(20)/ [(p^2p^1)/.5(p^2+p^1)]100
=>
(.4/.2) = 1/[(p^2p^1)/.5(p^2+p^1)]100
=> (50/100)/(p^2p^1)/.5(p^2+p^1)
=>p^2=10
p^2p^1
=> 106
thus the tax=$4
2. A.
S=D
220Q=2Q+10
Q=70
B.
MC=D
2Q+40=220Q
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 Fall '08
 MICHALSKI
 Economics, shut down, Pareto optimal allocation, percent price increases, dirty firms

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