# 2350f10test1answers - Question 1 1. If Jerry’s demand for...

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Unformatted text preview: Question 1 1. If Jerry’s demand for good x is given by r; = 30 — 6]) Where p denotes the good’s price, What is thel expression for Jerry marginal Willingness to pay? (5 marks)l xr=SO-6P — l =lD-—->< I . 1’ l’ 6 l =7 Maura-=5? ><J MwTP 2. Suppose Lan’s utility function is given by U(1;L, y) = 2011 — 21% + y. Find Lan’s demand for goodl x given the price of good y is 1 dollar and the price of good 1; is p. (15 marks] ax 20‘4XL 5 = .— = r .20— 4 ><L ( ) MRS m l =) 5'. (a 20‘4XL=T’ :3 X": 5 4? d 5 DH N ; 00>. (MDT-é: l4! A J- I 3. Which person is Willing to pay more for 2 units of the good7 Lan or Jerry? (5 marks)l - 2 Mw’rﬁ = 30—4 XL =>mguj=ﬂoxr2xr For. L4” I . l -2 For gem 1 Wm = 5 7: "i =’ “’7'? W 5 XV 75 ° :‘- WTPL : 20(2)—a (21) = 40 — lg = 3527 {:2 w “1(2) >0”); ,1) _ ‘ g. = ’0 , ,. : —_ WTFJbl 1' I; 1 6 c Question 2: Suppose an apartment building consists of 100 identical apartment. In each apartment livesl the ’representative family’, i.e., each family is the same and has monthly demand for water given byl a: = 20 — 4]), where p is the price of water. The landlord charges each family a constant monthly fee forl water each month equal to 40 dollars but she pays the water supplier a price of 2 dollars per unitl 1. What is the amount of water consumed each month by each family? Does the landlord charge enoughl money to cover the water expense for each apartment? (10 marks) Sm“ FIG 9°”- (‘454 FAMILW: x : 90-4 {0) :20 Yes. For: 44:»: Fémul, l~ whlch- I: équL ’I'o T4€ F66. 2. According to economists, the above arrangement is not efﬁcient. Brieﬂy explain why and ﬁnd thel value of the efﬁciency loss for each apartment. (15 marks)l MWTP= P Hem we laid“ MwTP:O 4 P Le. 'l'oo Win/g “Mi-(:9 a! MA (agol 011-6 anmmi. P XE —_- ganged-r 4mm? ’X:3=3><=l§ 4 ’1“ S-_2:_Xz2=3 N X ' — Fl 0 E on smPu/ XE=2°_4(2)=12' Z’l 1. Suppose market demand is given by Q = 500 — 10]). If the government imposes a sales tax equal to tl how will the demand for the good change? Derive the equation of the demand curve in the presencel of the tax and draw both demand curves on the same graph. (15 marks] 2. Suppose the government imposed a per—unit tax (instead of a sales tax). If ﬁrms charge consumers 2 dollars per unit before the tax is applied, and they continue to charge the same price after the tax is imposed (i.e.7 consumers pay 2 + t), What would be the tax per unit that will maximize the government’s (tax) revenue? (10 marks) ' — :' 8 — lot ‘41 1): aft) CONWMHZS 130‘] at— 509 l0{2+tv A 0 at = ’t- Qi =7 21;; T {4 {(0401) " ﬂou'T Revenue IS 9w 1. Suppose Rui’s utility function is given by U = XfYT. Find Rui’s demand for good X assuming hisl income is IT and the prices of the two goods are pm and pg. (10 marks} 4‘/ 2S: ”" f, \=;_ _ M X AL” '3) 4 Vxx X Py MR§=& l\ 2. Suppose Ken’s demand function is Xk = Ik/5pw where Ik is Ken’s income. What is the aggregatel demand function for good X if there are only two consumers, Rui and Ken? (5 marks] 3. What is the marginal revenue function for this aggregate demand function? (5 marks)l FKOM Til-£- PfM'ﬂ'N‘l eququle we gee (+91- >(: £511“ build/'1; Acwsmm. r /" 5 lﬂ-us MR: IEE‘E'): 0 Fan. ALL X. 4. If we took half of IT (Rui’s income) and gave it to Ken7 how would the demand for good X bel affected? Explain. no w 1 ‘F IM 2“! 4N9 4m IT 1'. ks“, gumse lv‘l I: eéTAIT '3 ;l+ g; +l¥_ ZSI-rjkizlﬂ Tm X: Allah “3 a 4 52G 513. Sr“ ?x {.2 QUAUTlT-f Dequow wnb DHJ'ZE/Hé. ...
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## This note was uploaded on 02/29/2012 for the course ECON 2350 taught by Professor Bardis during the Fall '12 term at York University.

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2350f10test1answers - Question 1 1. If Jerry’s demand for...

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