Q1: The demand curve is given by

QD= 600-5PX-0.8 I + 15Py- 2Pz

a. Based on the demand curve above, is X a normal or an inferior good?

b. Based on the demand curve above, what is the relationship between good X and Good Y?

c. Based on the demand curve above, what is the relationship between good X and good Z.

d. What is the equation of the demand curve if consumer incomes are $30,000, price of good Y is $15 and the price of good Z is $10?

e. Graph the demand curve that you found in (d), showing intercepts and slope. Suppose the price of good Y rises to $20, Graph the new demand curve.

Q2: Consider the market for Samsung Galaxy S21.

a. Scenario 1: Using a supply and demand graph, show what will happen to the current equilibrium price and quantity of S21s if people expect the price of S21s to fall in the future.

b. Scenario 2: Now, using the second supply and demand graph, show instead what will happen to the equilibrium price and quantity of S21s if the price of iPhone 13 falls. In your answer, assume that the S21 and iPhone 13 are substitutes in consumption.

Q3

a) Every valentine's Day, the price of roses spikes. Using your understanding of the factors that shift both supply and demand, draw the equilibrium in the rose market on January 31 and then draw the new equilibrium that occurs on February 14.

b) In the spring of 2020, during the COVID-19 lockdown, the price of gasoline in the United Sates plummeted to $1.75 per gallon. Use the supply and demand model to determine which curve shifted and what happened to the equilibrium price of gasoline. (Assume no other changes in the market for gasoline)

Q4

a) Black Friday, the day after Thanksgiving, is the largest shopping day of the year. Do the early shoppers, who often wait in line for hours in the cold to get doorbuster sale items, have elastic or inelastic demand? Explain your response.

b) If a 20% increase in price causes a 10% drop in the quantity demanded, is the price elasticity of demand for this good elastic, unitary or inelastic? Calculate.

c) At a price of $200, a cell phone company manufactures 300,000 phones. At a price of $150, the company produces200,000 phones. What is the price elasticity of supply?

d) Do customers who visit convenience stores at 3 a.m. have a price elasticity of demand that is more elastic or less elastic than those who visit at 3p.m.? Explain

Q5.

a) The following is a hypothetical short-run production function:

Hours of Labor	Total Output	Marginal Product
0
1	100	100
2		80
3	240

i) What is the total output when 2 hours of labor are employed?

ii) What is the marginal product of the third hour of labor?

iii) What is the average product of the first three hours of labor?

b) Fred is considering opening a ski shop in Colorado. Assume Fred will incur the following costs: building rent = $100,000/year, inventory = $250,000/year, energy = $50,000/year, and labor (one clerk) = $10,000/year. In addition, Fred's current income as a computer programmer is $40,000 per year. Assuming Fred would earn $460,000 in revenues, calculate economic profit and accounting profit.

c) Given the total cost, find the following

Output (Q): 0 1 2 3 4 5 6

Total Cost (TC): $24 $33 $41 $48 $54 $61 $69

i) What is the average fixed cost of 2 units of output?

ii) What is the marginal cost of the sixth unit of output?

iii) What is the variable cost of the third unit of output?