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# answer - ECON-314-03/04 Qian ANSWERS TO ECON-314-03/04...

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ECON-314-03/04, 9/14/10, Qian ANSWERS TO ECON-314-03/04 ASSIGNMENT 1 Question 1. (a) When there is a drought, the demand curve for umbrellas shifts to the left because the number of umbrellas demanded is now less than before at any given price. (b) For many movie goers, watching movie and eating popcorn just complement each other. Thus, when the price of popcorn in movie theaters goes up, the D-curve for movie tickets shifts to the left, as the demand for movie tickets from those people who view watching movie and eating popcorn as complements will decline at any given price. (c) Under the assumption that coffee and Pepsi are substitutes in terms of caffeine, then when the price of Pepsi declines, the D-curve for coffee shifts to the left. Question 2 (1). When M = \$6,000 millions, b P = \$5 per kg and c P = \$4 per kg and, the demand function becomes: P 4 660 000 , 6 1 . 0 4 5 5 4 P 4 20 Q d - = × + × + × + - = , that is, P 4 660 Q d - = . When 5 . 0 \$ P h = , the supply function becomes: P 6 640 5 . 0 40 P 6 660 Q s + = × - + = , that is: P 6 640 Q s + = .

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answer - ECON-314-03/04 Qian ANSWERS TO ECON-314-03/04...

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