Econ 34help
(15 points) Suppose the consumer considers goods 1 and 2 to be perfect complements, so that her utility function is u(1, X2) = min {x1, x2}. What is her demand for goods 1 and 2 as a function of income m and prices p1 and p2? Show the derivation, rather than just writing down the demand function if you have it memorized.3. Which of the following cases will result in the largest decrease in equilibrium price? The largest change in equilibrium quantity? Verify your answers by drawing graphs. a. Demand is highly inelastic; there is a relatively large increase in supply. b. Demand is highly elastic; there is a relatively small increase in supply. c. Supply is highly inelastic; there is a relatively small decrease in demand. d. Supply is highly elastic and demand is very inelastic; there is a relatively large increase in supply. 4. Suppose that the inverse demand curve for a dinner-for-two special at a small local restaurant can be expressed as P = 4,900 - 30?, where price is expressed in dollars and quantity in number of specials. What is the price elasticity of demand when 40 specials are purchased? Is the demand for specials elastic, unit elastic, or inelastic?(20 points) A consumer allocates her income m = 10 between goods 1 and 2, and she considers them to be perfect substitutes: 'u.(a:1, $2) = 3:1 + 3:2. The price of good 2 is $1 per unit, and but the price of good 1 is 2371 per unit. That is, good 1 becomes more expensive if more of good 1 is purchased. (a) Write down an equation expressing the consumer's budget constraint. (b) Draw the budget constraint, labeling the horizontal and vertical intercepts. (0) Draw an indifference curve that passes through the budget constraint. ) ((1 Compute the optimal bundle (1:35:73) demanded by the consumer. (i1 Two inspectors carry out property valuations for an estate agency. Over a particular week they each go out to similar properties. The table below shows their valuations (in films}: A 102 98 93 86 92 94 89 9? B So 33 92 95 9S 9'? 94 92 91 (a) Make an informative plot of these data. [b] Comment on an assumption of equal variance for the two underlying populations. (c) With the equal variance assumption of {b}, calculate a 95% condence interval for this common variance. (d) Calculate a 95% confidence interval for the mean difference between the valuations by A and B, and comment briey on the result. The estate agency employing the inspectors decides to test their valuations by sending them each to the same set of eight houses, independently and without knowledge that the other is going. The resulting valuations (in 0s} follow: Properly l 2 3 4 5 E 7' 3 A 94 93 102 132 113 121 106 123 B 92 96 111 129 111 122 101 113 (a) Make an informative plot of these data. (b) Calculate a 90% condence interval for the mean difference between valuations by A and B, and comment briey on the result. QUESTION 1 [10 marks] The following is a simplified hypothetical example of the value added method of calculating GDP. Use the information given and show how the value added method is used to calculate GDP. According to this example, how much value added do the books contribute to the GDP, and explain why that specific figure? 50 (a) A forester chops down 100 trees and sells them @ N$100 each to the Paper and Pulp Factory, (b) The Paper and Pulp Factory processes these trees into paper and sells the paper @ N$15 000 to the printers. 500 10O (c) The printers go to press and sell the 300 books they print @ N$80 each to CNA. 500 150 (d) CNA sells the 300 books @ N$120 each to consumers. HINT: The best way to answer this question is in table format
