Problems: 3( a) and( b), 7, 9, and 14, 15.
Froeb et al.’ s Chapter 6: Individual problems: 6-1, 6-3, and 6-5.
Salvatore’ s Chapter 5: Problems: 8, 15( b) and( c), and appendix problem 2( p. 215).
Discussion Question 8: If the price increase by 10 percent by how much does the quantity of household a) natural gas and b) electricity change in the short run and the long run?( Hint: use the price-elasticity values). Discussion Question 10: Agricultural commodities are known to have a price-inelastic demand and to be necessities. How can this information allow us to explain why the income of farmers falls a) After a good harvest? b) In relation to the incomes in other sectors of the economy?
Discussion Questions: 11. Suppose that the cross-price elasticity of demand between McIntosh and Golden Delicious apples is 0.8 between apples and apple juice is 0.5 between apples and cheese is-0.4 and between apples and beer is 0.1 what can you say about the relationship between each set of commodities
Problem 3: Starting with the estimated demand function for Chevrolets given in Problem 2, assume that the average value of the independent variables changes to N = 225 million, I = 12,000, PF = 10,000, PG = 100 cents, A = 250,000 and PI = 0. a) Find the equation of the new demand curve for Chevrolets. b) Plot this new demand curve, D’ C, and, on the same graph, plot the demand curve for Chevrolets, DC, found in Problem 2( d).