Answered step by step
Verified Expert Solution
Question
1 Approved Answer
1. Given the following supply and demand model: C1D = a - bP + eYU Demand C15: -c+dP +fPr Supply C1,, = ClS Equilibrium where:
1. Given the following supply and demand model: C1D = a - bP + eYU Demand C15: -c+dP +fPr Supply C1,, = ClS Equilibrium where: a, b, c, d, e > 0, Y0 is exogenous income, Pr is the exogenous price of a related good. a) Solve for the equilibrium price (P*) and quantity (05\") in terms of the parameters and exogenous variables. b} What are the necessary conditions for positive equilibrium prices and quantities? c) What is the economic interpretation of the para meter "f\"? d} What will be effect (increase or decrease) of an increase in exogenous income on P', the equilibrium price? 2. Find P\" and Q\" for the following models in specific form: (This is question 6, p.40 of the text) a) C1,, = Q, Equilibrium C1,, = 3 - P2 Demand Q5: -4+EP Supply b) C1,, = C15 Equilibrium C1,, = 8 - P2 Demand C1,, = -2 + P2 Supply 3. Given the following macroeconomics model: (Question 1, p47 of the text) Y=C+|O+G0 Equilibrium Income (Y) C = a + b(Y-T} Consumption with Taxes (T), where: a > 0, O 0,0 0, 0
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started