This preview shows pages 1–2. Sign up to view the full content.
Intermediate Microeconomics
Instructor: Sandra Orozco
Homework 1
Due date: September 13
th
, 2010
IMPORTANT NOTE: Do not forget to label your graphs properly!!!
1
. The demand for beer in Japan is given by the following equation:
Qd = 700  2P  PN + 0.1I
where P is the price of beer, PN is the price of nuts, and I is average consumer income.
a) What happens to the demand for beer when the price of nuts goes up? Are beer and
nuts demand substitutes or demand complements?
b) What happens to the demand for beer when average consumer income rises?
c) Graph the demand curve for beer when PN = 100 and I = 10, 000.
2
. The demand and supply curves for coffee are given by
Qd = 600  2P
and
Qs = 300 + 4P
a) Plot the supply and demand curves on a graph and show where the equilibrium occurs.
b) Using algebra, determine the market equilibrium price and quantity of coffee.
3
. Suppose that demand for bagels in the local store is given by equation
Qd = 300  100P
In this equation, P denotes the price of one bagel in dollars.
a) Fill in the following table:
P
0.1
0
0.45
0.50
0.55
2.50
Q
d
ε
Q,P
b) Plot this curve in a graph. Is it linear?
c) At what price is demand unitary elastic?
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview. Sign up
to
access the rest of the document.
 Fall '06
 Unver
 Microeconomics

Click to edit the document details