Homework 1 - ECON 1100: Intermediate Microeconomics...

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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?
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Homework 1 - ECON 1100: Intermediate Microeconomics...

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