:Solve the following problems.

1- The table below gives the demand schedule for snow peas. The price elasticity of demand between $6.00 and $7.00 per bushel is *

Price (Dollars Per Bushel) Quantity Demanded (bushels)

8 2000

7 4000

6 6000

5 8000

4 10000

3 12000

1.0.

5.0.

2.0.

2.6.

2- Suppose the demand for good X is given by Qd = 300 - 5Px - 5Py + 20 I where Px is the price of good X. Py is the price of some other good Y, and I is income.

Assume that Px is currently $1, Py is currently $2, and I is currently $50.The income elasticity is

0.78, the good is inferior

0.78, the good is normal

1285, the good is normal

1285, the good is inferior

3- Find the market equilibrium if P=-40+Q and P=80-Qd

Q=80,P=40

Q=40, P=80

Q=60, P=20

Q=20, P=60

4- As more firms substitute alternative materials, such as aluminum for copper, the market price of copper would be expected to:

decrease.

increase.

stay the same.

cannot be determined with the information given.

5- When calculating the price elasticity of demand, which of the following conditions must be satisfied?

All other factors that influence demand must be held constant.

Prices of related goods must be held constant but all other factors must be allowed to vary.

Prices of related goods must be allowed to vary but all other factors must be held constant.

All other factors than influence demand must be allowed to vary.

6- The cross elasticity between goods L and T is -0.33, then goods L and T are *

substitute

complements

normal

inferior

7- Assume there is a simultaneous decrease in the incomes of people in the market for new homes and a decrease in the wages paid to carpenters, plumbers, and electricians. All else constant, we can predict, with certainty, that in the market for new homes the equilibrium: *

quantity of new homes will decrease.

quantity of new homes will increase.

price of new homes will decrease.

price of new homes will increase.

8- In the long run, demand for the good will: *

tend to become more price elastic.

tend to become closer to unit elastic.

tend toward being perfectly elastic.

tend to become more price inelastic.

9- What is the price elasticity of the following demand function, P=70 *

Ed=0

Ed=1

Ed=?

Ed

10- Calculate the supply equation *

Demand Supply

Price Quantity Demanded (per Period) Price Quantity Supplied (per Period)

10$ 15000 10$ 22,000

9 15,500 9 19,000

8 16,000 8 16,000

7 16,500 7 13,000

6 17,000 6 10,000

5 17,500 5 7,000

4 18,000 4 4,000

3 18,500 3 1,000

Qs = 8,000 - 3000P

Qd = 20,000 - 500P

Qd = 20,000 + 500P

Qs = -8,000 + 3000P

Consider the model of labor market equilibrium discussed in class. Assume that jobs have all the same 3 hours/day shift, so labor supply choices happen only at the extensive margin. That is, workers only need to decide whether to work or not. Also assume that the product produeed in this labor market is priced at the international markets which makes the demand for the nal good innitely elastic . Thus, changes in the labor market will not affect the price of the good being produced. The number of workers willing to supply labor evolves according to the following labor supply function: L3 = w"! Where L, is the measure of workers willing to supply labor, to is the wage rate, and a", is the labor supply elasticity. In the other side of the market, rms face the following production tech- nology: y = ALE, where A measures the productivity, Ln. is the number of workers the rm is employing, and y is the total number of units of output that is produced. Firms maximize prots, which are the difference between revenues and costs: Prot : Revenues Costs 11 =pyy de, where [I is the prot, 11: is the wage rate, and p5, is the price of the product This question is about monopolistic competition and trade. Assume that firms in the automobile industry face the following price function P = 20000 + 2500 n where P is the equilibrium unit price a single firm demands and n denotes the number of firms that operate in the market. The average cost each firm faces is AC = 50000 . 0, = (0) = 1, Me/P-+0 lim = (M:/ P) = 0. The function f (ke) has standard properties. The money supply in this economy is growing at the constant rate & > 0 and capital depreciates at the constant rate of 6