Susan Lu
1.
a) The damaged supply crop shifts the supply to the left because now suppliers must charge a
higher price for their products, as a result equilibrium quantity decreases
b) Assuming sweatshirts are substitutes for leather jackets, the demand curve shifts left,
resulting in a lower quantity demanded for sweatshirts, and the equilibrium price falls.
c) Students will have a higher demand for sweatshirts after the attire mandate. The demand
curve shifts to the right, increasing the quantity demanded, and driving up equilibrium price.
d) Newer technology will drive the supply curve down, decreasing the equilibrium price and
increasing equilibrium quantity
Susan Lu
2.
a) Inverse function: P = 40-Q/30
b)
c) Use the midpoint formula (“arc elasticity”) to calculate the elasticity between points A and B,
and between points C and D. Explain the pattern that emerges.
3. Q = 6000 - 0.5Px - Py +9Pz + 0.1M
Py=6500
Pz=100
M=70000
a) Y and Z are substitutes because they have opposing signs in the equation
b) X is normal
c) If Px = 5230, Q = 6000-.5(5230)-6500+9(100)+.1(70000) = 4785
d) Px = 12000 - 2Qx - 2Py + 18Pz + M/5
4. Qx = 1200 - 3Px - 0.1Pz
Pz=300
a)
P1=140, Q1=750
P2=150, Q2=720 Elasticity [-30/(720+750)2]/[10/(140+150)/2]
Elasticity: -0.5918; inelastic.
If the firm charged a price below 140, the revenue would increase but at a lower percentage
than which the price decreased, because this good is inelastic...
