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Unformatted text preview: This causes the price to rise and the quantity demanded falls and the quantity supplied rises until the new equilibrium is reached. 7. A) P M , Q M both increase; P C , Q C both decrease; B) Set supply = demand for both cookies and milk and solve the two equation in two unknowns for (P M , Q M ) = (P C , Q C ) = (10,10). C) Repeat the steps in B) with the new milk demand to get (P C , Q C ) = (5,5), (P M , Q M ) = (25,25) 8. A. 1/4, B. 1.5, C. To find this, use two equations. First, set the equation for elasticity equal to one: 4(P/Q) = 1. Now, we also need to be sure that were on this demand curve so we also need Q d = 50 4P. Solve these equations to get (Q,P) = (25, 6.25). D. P > 6.25, e. P < 6.25. 9. Simply maximize TR = 27Q Q 3 to get P = 18, Q = 3. 10. A) 30,000 cents, B) 5, C) lower, D) P = 60 11. P E = $3.50, Q E = 18,000 12. P AT = $4.25, Q AT = 15,000 13. P AS = $2.75, Q AS = 21,000 14. 6,000...
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 Winter '08
 SCHULZ
 Economics, Microeconomics

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