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MT1120A_Solution 09s - Name Id Midterm I Basic Economics I...

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Name: Id #: Midterm I Basic Economics I UC Irvine Wilima Wadhwa Economics 20A Spring 2009 This exam consists of five questions. Answer all questions and explain all your answers. Read the entire exam carefully before you begin. Good Luck! 1. (5points) State whether True, False or Uncertain along with a short explanation: For an inferior good demand increases as its price increases. Answer: False. An inferior good is one whose demand goes down when income goes up. 2. (5 points) Market research has revealed the following information about a market: P Q and P Q S D 350 700 150 800 + = - = Calculate the equilibrium price and quantity in this market. Answer: P*= $0.2 Q*= 770 They get no points if they just give the answer --- they have to show the steps: Equilibrium: S D Q Q = , etc 1 point for stating equilibrium condition and 2 pts each for price and quantity
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Name: Id #: 3. (10 points) Textbooks have an inelastic demand and mystery novels have an elastic demand.
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