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    Demand & Supply

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    Price elasticity

    1: The demand for personal computers can be characterized by the following elasticities: Price elasticity = -5 Cross-price elasticity with software* = -4 Income elasticity =2.5 *relates a change in computer prices to changes in the quantity demanded of software Indicate whether each of the following statements is tru

    Determining the Coefficient of Price Elasticity

    Price rises from $10 to $15, and the quantity demanded falls from 100 units to 60 units. What is the coefficient of the price elasticity of demand between the two prices? A) 1.25 B) 0.80 C) 0.60 D) 1.00

    Envelope Theorem Inferior Goods

    Consider the problem of maximizing u(c,l) subject to pc + wl = wT + Y, where c is consumption, l is leisure time, T is the total time endowment, and Y is non-wage income. Show that if leisure is an inferior good, then the labor supply function is upward-sloping. b) Given the problem of maximizing ln x subject to α &#880

    Define excess burden

    A. An economist estimates that a new tax on labor income has had an effect on the labor supply of affected taxpayers (in other words, affected taxpayers work the same amount of hours after the tax is imposed). He therefore concludes that the excess burden of the new tax is zero. Do you agree? Define "excess burden", and explain

    relationship between excess burden of tax and demand and supply

    The city of Trenton is considering a substantial annual per employee tax on Trenton State College. Suppose that the labor supply curve to TSC is relatively flat because the employees have alternative places to work, and that the College has limited liability to substitute machines or other inputs for people. a. Show this s

    Excess Burden

    In Risainia (a hypothetical country), the prices of commodities such as food and clothing are set in a free market, but housing is heavily subsidized by local governments. A two-bedroom apartment, for example, might rent for $10.50 per month. (Utilities and other fees increase the cost to about $350.) Consider the following st

    Elasticity of Demand

    Cross-Price Elasticity. B.B. Lean is a catalog retailer of a wide variety of sporting goods and recreational products. Although the market response to the company's spring catalog was generally good, sales of B.B. Lean's $140 deluxe garment bag declined from 10,000 to 4,800 units. During this period, a competitor offered a wh

    Supply Curve

    A) In the long-run in perfectly competitive industries the (long-run) supply curve of the industry can be derived. Explain likely outcomes (slopes) of long-run supply curve in various situations B) Explain economies of scale. What are the major reasons for this phenomenon? What are the likely slopes (shapes) of the long-run a