Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 4, Problem 14P
(a)
To determine
(b)
To determine
The effect on equilibrium price and quantity when the input prices of a computer rise.
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An economist has estimated that the demand function for cars is approximately D = −400P + 4I where I is the mean household income. The Supply of cars is estimated to be S = 2p
(a) What is the equilibrium price of cars (it will be a function of I)?(b) How does the equilibrium price of cars change when I changes?
Suppose that the quantity of corn supplied depends on the price of corn (P) and the amount of rainfall (R). The demand for corn depends on the price of corn and the level of disposable income (I). The equations describing the supply and demand relationships are Qs = 20R + 100P and Qd = 4000 − 100P + 10I.
a) Sketch a graph of demand and supply curves
b) Sketch a graph that shows the effect of an increase in rainfall on the equilibrium price and quantity of corn.
c) Sketch a graph of demand and supply curves that shows the effect of a decrease in disposable income on the equilibrium price and quantity of corn.
Consider two markets: the market for motorcycles and the market for pancakes. The initial equilibrium for both markets is the same, the equilibrium price is $4.50, and the equilibrium quantity is 29.0. When the price is $7.75, the quantity supplied of motorcycles is 65.0 and the quantity supplied of pancakes is 103.0. For simplicity of analysis, the demand for both goods is the same. Using the midpoint formula, calculate the elasticity of supply for pancakes. Please round to two decimal places.
Chapter 4 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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