HW01-EC11-Solution

Mitedu massachusetts institute of technology

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Unformatted text preview: increase the price of a metro pass from $1.25 to $2.00, and also increase the price of monthly metro passes. Show the effect on demand, supply and on the equilibrium price and quantity in the Los Angeles area for used cars. Are monthly metro passes and cars substitutes or complements? Consumers will probably opt to drive instead of taking the metro in response to the increase in metro fares. So the demand of used cars increases, the supply of used cars stays constant, the equilibrium price and quantity increase. The monthly metro passes and cars are substitutes; monthly metro pass holders probably use the metro as their primary form of transportation instead of cars. 1 Cite as: William Wheaton, Chia-Hui Chen, Rongzhu Ke, Monica Martinez-Bravo, Marco Migueis, Peter Schnabl, and Hongliang Zhang, course materials for 14.01 Principles of Microeconomics, Fall 2007. MIT OpenCourseWare (http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [02 04 2010]. o o The American South was the biggest producer of cotton. The civil war significantly reduced the quantity of cotton produced by the United States. Show the immediate effect on the world cotton market. Suppose the popularity of a new fad diet causes consumers’ tastes to shift away from bread. Show the effect on the market for butter, which is used mainly when people eat toast. Butter and bread are compl...
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