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Microeconomic Analysis 1: problem set 1.

Question 1.  suppose that the consumer demand function is q  =  100 - p. The market supply function is q = 3p. which one of the following statements is correct?

Question 3.  suppose that the labour market supply function is q =  50w, where q is the labour hours supplied and w is the market hourly wage.  A irm,s demand function for labour is given by q = 1000-30w. The government is considering introducing a minimum hourly wage of w. which one of the following is false?

(a)  without the minimum wage, the equilibrium wage would be 莺12.50 an hour.

(b)  without the minimum wage, the equilibrium involves full employment (zero excess supply of labour).

(c)  If the minimum wage is imposed and w  <  f11, then there is full employment (zero excess supply of labour).

(d)  If the minimum wage is imposed and w = f15, then an excess supply of labour of 300 hours is created.

(e)  If the minimum wage is imposed and w  =  f10, then there is full employment (zero excess supply of labour).

Part B - provide written answers to all parts.

Question 4.  suppose that the consumer,s demand function for a good is q  =   where Y > 0 is the consumer,s income.  The market supply function for this good is q  =  100p. please answer the following:

(i)  Find the market equilibrium price and the quantity sold in equilibrium in terms of the consumer,s income Y. produce a diagram. Hints: when you graph these, they must be inverted (price on the vertical axis, quantity horizontal). use calculus to glean the shape of the demand function (take irst and second derivatives to learn its shape).

(ii)  Determine precisely how the equilibrium price changes as the consumer,s income changes (calculate ).  How can income changes be represented on the demand diagram?

(iii)  suppose that the consumer,s income is 莺20,000. The government is considering im- posing a tax on the irm of 莺50 for every unit sold.  Explain fully the efect of this policy on the equilibrium price.