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1. Andrew has a constant elasticity of substitution (CES) utility function,
U(x1, x2) = where and
Determine Andrew’s optimal bundle (x1, x2) in terms of his income m and prices of the two goods, p1 and p2.
2. Lynn has a Cobb-Douglas utility function
U(x1, x2) =
What share of her budget does she spend on x1 (recorded music tracks) and x2 (live music) in terms of her income m = $30, prices of the two goods, p1 = $0.5 and p2= $1?
3. Celine’s quasilinear utility function is
Her budget for these two goods is $10. Originally the prices are p1 = p2 = $1. However, the price of the first good rises to $2. Determine the substitution, income and total effect of this price change on the demand for x1.
If Ernie produced and Bert consumed one fewer bottle of water, what would happen to total surplus?
Consider an Economy in its medium run equilibrium. Now suppose that the government passes a stricter law against the exercise of market power leading to decline in mark-up over wages. Explain using IS-LM and AD-AS curves how it will affect price level, interest rate and output in the short run and in the medium run.
assume that you are an entrepreneur of a hotel what are the fixed and variable cost to be carried out in that business?
Ketchup is a complement (as well as condiment) for hotdogs. If the price of hotdogs rises, what happens to the market for ketchup? For tomato juice? For orange juice?
Classify each of the following statements as positive or
normative. Explain.
a. Society faces a short-run trade-off between
inflation and unemployment.
b. A reduction in the rate of money growth will
reduce the rate of inflation.
c. The Federal Reserve should reduce the rate of
money growth.
d. Society ought to require welfare recipients to look
for jobs.
e. Lower tax rates encourage more work and more
saving.
Question 29
If a demand curve and a supply curve can be stated functionally as QD = 100 - 5p; and Qs = 90 + 5p, respectively, then the
equilibrium quantity and price would be
Q=50-4P
Q=15+P
what is the surplus in the market if the government sets a price floor of P=10?
d) what is the shortage in the market if the government imposes a price ceiling of P=5?
e) calculate the price elasticities of demand and supply when P=7
f) calculate the price elasticities of demand and supply when P=10.
c. Jack and Jill went up the hill to a gas station that does not display the prices. Jack says, “Give me $10 worth of gas.” Jill says, “Give me 10 gallons of gas.”
What are the price elasticities of demand for gasoline of Jack and of Jill? Explain.
d. Can you explain why farmers during a depression might approve of a government program requiring that pigs be killed and buried under the ground?
e. Look at the impact of the minimum wage shown in Figure 4 -12 . Draw in the rectangles of total income with and without the minimum wage. Which is
larger? Relate the impact of the minimum wage to the price elasticity of demand for unskilled workers.
#340153 on Dec 2023