Question no.

1A:

i.
market demand curve
40

30

price 20

10

0
1 2 3 4 5 6 7 8
10 40 35 30 25 18 15 10 5
20
30
40 appartments

ii. The highest price is $ 18.

iii. The lowest price is $15.
iv. A-B-C-D.
v. $11-15.

Question No. 1 B:
i.

person A B C D E F G H
high price 18 18 18 18 25 18 25 25
low price 16 16 16 16 19 16 19 19

ii. $ 18 is the highest price, and the price is still at its equilibrium price.

Question No 1C:
 i.

Number 1 2 3 4 5 6 7 8
Price 40 35 30 25 18 15 10 5
Revenue 40 70 90 100 90 90 70 40

ii. F having reservation price of $ 18.

iii. He will charge $18 to maximize his revenue.
iv. A-B-C-D-F.
v. $148. (40+35+30+25+18)
vi. A-B-C-D-F.

Question No 1D:

i. E will sublet to F.
ii. $ 18.
iii. A-B-C-D-F.
iv. Market outcome will remain same.

Question NO. 1E:

i.
person A B C D E F G H
Reservation price $ 45 40 35 30 23 20 15 10
ii. $ 13.
iii. $ 18.
iv. Landlord revenue will be reduced.

Question No. 2A:

i. P1X1+P2 X2=m or P1X1+P2X2≤m or 10X1+5X2=40

ii. m/p1
= 40/10
= 4 units
iii. m/p2
= 40/5
= 8 units.

X-axis: commodity 1
 Y-axis: commodity 2.

m/p2
8

m*/p2 Budget line at income $40.

6 1v Budget line when price of c1 decreased.
Budget line when income decreased to $30.

2 1v

X
2 4 6 8
m/p1 m*/p1 m/p/1

iv. P/1X1+P2 X2=m or

5X1+5X2=40
v. P/1X1+P2X2=m* or
5X1+5X2=30

Question No. 2 B:

i. 2P+4M+6J=360.

ii. 2 crowns =1 unit of new currency.

So price of meatballs =2 units

iii. Price of jam=3 units.

iv. 180 units.

v. P+2M+3J=180.
No
Question No. 2C:

i. Total budget=$5000, business magazine cost=$500 each ad ,

5000/500=10 ads.
Read by recent MBA’s =10(1000)
=10,000 MBA’s
Read by lawyers with hot tubs =10(300)
= 3000 lawyers.
ii. Total budget=$5000, consumer magazine cost=$250 each ad,
5000/250=20ads.
Read by recent MBA’s = 20(300)
=6000 MBA’s
Read by lawyers with hot tubs= 20(250)
=5000 lawyers.
iii. Budget spent on business magazine = $5000/2 =$2500
Total ads in business magazine=$2500/$500= 5 ads

Read by recent MBA’s =5(1000)

=5,000 MBA’s
Read by lawyers with hot tubs =5(300)
= 15000 lawyers.
Budget spent on consumer publication=$5000/2=$2500
Total ads in consumer publication=$2500/$250= 10 ads

Read by recent MBA’s =10(300)

=3,000 MBA’s
Read by lawyers with hot tubs =10(250)
= 2500 lawyers.
So, Total MBA’s who read it = 5,000+3,000 =8,000
Total lawyers who read it = 1,500+2,500 =4,000
iii. Ghjgg
iv. X-axis: reading by MBA’s
Y-axis: reading by lawyers.

Lawyers Y
8

5 (6000, 5000)
Budget Line
4 (8000, 4000)

3 (10000, 3000)

X
1 2 3 4 5 6 7 8 9 10

MBA’S (in thousands)

v. (10000,3000) and (6000,5000)

(X1, Y1) (X2, Y2)
= Y2-Y1/X2-X1
=5000-3000/6000-10000
= 2000/-4000
= -0.5L/M
So, 2000 readings by MBA’s must be sacrifice to get 1000 additional readings by
Lawyers.