PROBLEM (1) The demand for good X is Qp = 60 - Px(1+ Py) +12 where px is the price of the good X, P, is the price of a related good Y and I is the average income level. (a) Does the demand become more own-price elastic (at a given p,) as py increases? (b) Calculate the Income elasticity of demand at the point I- 10, px = 10, py = 5 PROBLEM (2) The demand and supply in a market are of constant elasticity form with elasticities equal to -1 and 2, respectively. The market is in equilibrium at p-2 and Q-800. (a) Derive the demand and supply equations. I We learn that the demand in (a) was actually the sum of the (identical) demands of 800 (b) (BONUS adults and that Z00 adults have now left the economy. Calculate the new market equilibrium.
PROBLEM (1) The demand for good X is Qp = 60 - Px(1+ Py) +12 where px is the price of the good X, P, is the price of a related good Y and I is the average income level. (a) Does the demand become more own-price elastic (at a given p,) as py increases? (b) Calculate the Income elasticity of demand at the point I- 10, px = 10, py = 5 PROBLEM (2) The demand and supply in a market are of constant elasticity form with elasticities equal to -1 and 2, respectively. The market is in equilibrium at p-2 and Q-800. (a) Derive the demand and supply equations. I We learn that the demand in (a) was actually the sum of the (identical) demands of 800 (b) (BONUS adults and that Z00 adults have now left the economy. Calculate the new market equilibrium.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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a and b only please
Transcribed Image Text:PROBLEM (1) The demand for good X is Qp = 60 - Px(1+ py) + 1? where p, is the price of the good X,
Py is the price of a related good Y and I is the average income level.
(a)
Does the demand become more own-price elastic (at a given p,) as pP, increases?
(b)
Calculate the Income elasticity of demand at the point I = 10, Px = 10, py = 5
PROBLEM (2) The demand and supply in a market are of constant elasticity form with elasticities equal to -1
and 2, respectively. The market is in equilibrium at p=2 and Q-800.
Derive the demand and supply equations.
(a)
(b) (BONUS
We learn that the demand in (a) was actually the sum of the (identical) demands of 800
adults and that 700 adults have now left the economy. Calculate the new market equilibrium.
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