Problem Set2

# Problem Set2 - BPUB250 Problem Set2 Due February 8-9 2012...

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BPUB250 Problem Set2 Due: February 8-9, 2012 in Class Question 1 This question continues from Question2 in Problem Set1. Now Wharton School introduces a \$2/burrito student discount, so that Wharton students pay \$2 less than the general public per each burrito they buy. (a) Find the new equilibrium price and quantity, and compute how many burritos are sold to the general public and to students. (b) Calculate the total change in consumer surplus due to student discount. Question 2 Consider the market for pork. The demand for pork is given by Q d = 225-20P and the initial supply is given by Q s =50+35P . The market for pork is perfectly competitive. (a) Compute the equilibrium (b) What are the price elasticity of demand and the price elasticity of supply at the market equilibrium? Are they elastic, inelastic or unit elastic? Based on the price elasticities, who do you think will suffer more if a specific tax is imposed on the producers? Now a \$2 per unit tax is charged to producers.

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Problem Set2 - BPUB250 Problem Set2 Due February 8-9 2012...

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