1.  Which of the following would be likely to reduce (shift to the left) the demand for resi- dential housing? Explain very briefly (a line or two for each item) why your answer is correct and why the remaining answers are not.

(a) High prices for residential housing units.
(b) High mortgage interest rates.
(c) High prices for lumber and other construction materials. (d) Low unemployment rates.
(e) Low prices for residential housing units.

2.  Suppose demand for inkjet printers is estimated to be Q=1000-5p+10pX -2pZ +0.1Y,

where p is the price of inkjet printers, pX and pZ are prices of other products, and Y is the level of income. If p = 80, pX = 50, pZ = 150, and Y = 20, 000; answer the following:

1. (a)  What is the price elasticity of demand?
2. (b) Whatisthecross-priceelasticitywithrespecttogoodX?Giveanexampleofwhat commodity X might be in this context, i.e. that its price has the impact you just calculated on the demand for inkjet printers.
3. (c)  What is the cross-price elasticity with respect to commodity Z? Give an example of what commodity Z might be in this context, i.e. that its price has the impact you just calculated on the demand for inkjet printers.
4. (d)  What is the income elasticity?

3.  In each case below, identify the effect on the supply and/or demand in the market for

oranges. Discuss also effects on equilibrium prices and quantities.

1. (a)   A very bad winter in Florida creates a negative effect in the production of oranges.
2. (b)   The government introduces a successful advertising campaign promoting the nu- tritional benefits of oranges.

(c) Both (a) and (b) happening simultaneously.
4.  According to a study, the price elasticity of sneakers in Canada is -0.7, and the income

elasticity is 0.9.

1. (a)YouareaconsultanttoNewSneakersCo.WouldyousuggestthatNewSneakers cut its prices to increase its revenue?
2. (b)  What would be expected to happen to the total quantity of sneakers sold in Canada if incomes rise by 10 percent?

5. JR Corp. estimates that the demand curve for its product is P = 4, 000 - 40Q, where P is the price per unit in dollars and Q is the number of units sold.

1. (a) Provide a graph with the demand and marginal revenue curves for JR.
2. (b) CalculatetheconsumersurpluswhenJRcharges$2,000perunit.Provideagraph that indicates the consumer surplus at this price.
3. (c) Will the consumer surplus increase or decrease if JR decides to raise its price to $2,800 per unit and by how much?

6.  Sam is given a free ticket to see Coldplay Saturday night. He already has a ticket to see Sting in concert that night. The Sting ticket cost Sam $50 though he would have paid as much as $80 to go to the show. Sam knows that he can easily sell the Sting ticket on Craigslist for $60. What is his opportunity cost of seeing Coldplay?