EP ECON.TODAY:MACRO VIEW-MYECONLAB W/TX
19th Edition
ISBN: 9780134481234
Author: Miller
Publisher: PEARSON CO
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Chapter 3, Problem 3.1LO
To determine
The
Expert Solution & Answer
Explanation of Solution
- The law of
The figure below shows a downward sloping demand curve from left to right based on the law of demand. When the price of the good is $30, the quantity demanded is 50 thousand units and when the price increases to $60, the quantity demanded falls to 20 thousand units and so on.
Algebraically the law of demand can be stated in partial derivatives (assuming ceterus Paribus) as follows −
Where X = Quantity demanded.
P = Price.
Economics Concept Introduction
Introduction:
Law of Demand − The demand law states that as the price of a good increases its quantity demanded decreases and vice versa. In other words, there is an inverse relationship between the quantity demanded and product price. The law is based on the assumption of ceteris paribus, that is, when all other factors affecting the supply remain constant.
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Problem 2. If the consumer preference can be represented by a CES function with δ = 0.5, i.e. u(x, y) = x0.5 + y0.5. Let the prices and income be (px, py, w).
1. Set up the Lagrangian expression.2. Take the first-order conditions.3. Substitute into budget constraint to derive the optimal consumption bundles.
1. A town relies on four different sources for its non-drinking water needs: dam water,
reclaimed water, rain water, and desalinated water. The different sources carry different
risks and costs. For instance, desalinated water is fully reliable due to abundant sea water,
but it is more expensive than other options. Reclaimed water also has relatively lower
risk than rain or dam water since a certain amount can be obtained, even during the dry.
season, by the treatment of daily generated waste water.
Using any of the four options requires an investment in that resource. The return on a
particular water source is defined as the amount of water generated by the source per
dollar of investment in it. The expected returns and standard deviations of those returns
for the four water sources are described in the following table:
Water resource
Expected return St. Deviation
Dam water
2.7481
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Reclaimed water
1.6005
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Rain water
0.5477
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Higher…
1. Imagine a society that produces military goods
and consumer goods, which we'll call "guns"
and "butter."
a. Draw a production possibilities frontier for
guns and butter. Using the concept of
opportunity cost, explain why it most likely
has a bowed-out shape.
b. Show a point that is impossible for the
economy to achieve. Show a point that is
feasible but inefficient.
c. Imagine that the society has two political
parties, called the Hawks (who want a strong
military) and the Doves (who want a smaller
military). Show a point on your production
possibilities frontier that the Hawks might
choose and a point the Doves might choose.
d. Imagine that an aggressive neighboring
country reduces the size of its military. As a
result, both the Hawks and the Doves reduce
their desired production of guns by the same
amount. Which party would get the bigger
"peace dividend," measured by the increase in
butter production? Explain.
Chapter 3 Solutions
EP ECON.TODAY:MACRO VIEW-MYECONLAB W/TX
Ch. 3 - Prob. 3.1LOCh. 3 - Prob. 3.2LOCh. 3 - Explain the law of supplyCh. 3 - Prob. 3.4LOCh. 3 - Prob. 3.5LOCh. 3 - Prob. aFCTCh. 3 - Prob. bFCTCh. 3 - Prob. cFCTCh. 3 - What do you suppose has happened since 2008 to the...Ch. 3 - Prob. eFCT
Ch. 3 - Prob. fFCTCh. 3 - Prob. gFCTCh. 3 - Prob. hFCTCh. 3 - Prob. 1CTQCh. 3 - Prob. 2CTQCh. 3 - Prob. 1FCTCh. 3 - Prob. 2FCTCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7PCh. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - In Figure 3-4 |O, the current position of the...Ch. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21P
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