# HW 1 1

Good Essays
ECON 3305 – Managerial Economics
Name:

HOMEWORK – 1

Due: Sep 9, 2014

PART – I
Multiple Choice Questions

1) Which of the following will result in a decrease in demand for residential housing in the short run?
A) a decrease in the price of lumber
B) an increase in the wages of carpenters
C) a decrease in real household incomes
D) a decrease in the prices of residential housing
2) Two goods are ________ if the quantity consumed of one increases when the price of the other decreases.
A) normal
B) superior
C) complementary
D) substitute
3) Which of the following will not cause the demand curve for good X to shift?
A) a change in the price of X
B) a change in the price of Y, a complement
C) a change in the price of Z, a substitute
D) an
f. The price of the good rises.

5) Explain the law of supply. Why does a supply curve slope upward? How is a market supply curve derived from individual supply curves?

3

ECON 3305 – Managerial Economics

HOMEWORK – 1

Due: Sep 9, 2014

6) Suppose that macroeconomic forecasters predict that the economy will be expanding in the near future. How might managers use this information?

7) For each of the following sets of supply and demand curves, calculate equilibrium price and quantity. a. QD = 2000 - 2P; QS = 2P
b. QD = 500 - P; QS = 50 + P
c. QD = 5000 - 10P; QS = -1000 + 5P

8) Annual demand and supply for the Entronics company is given by:
QD = 5,000 + 0.5 M + 0.2 A - 100P, and QS = -5000 + 100P where Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.
a. What is the value of the slope parameter for the price of the good? Does it have the correct algebraic sign?
Why?
b. If A = \$10,000 and M = \$25,000, what is the demand curve?
c. Given the demand curve in part a., what is equilibrium price and quantity?
d. If consumer incomes increase to \$30,000, what will be the impact on equilibrium price and quantity?