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ECON 3010 Intermediate Microeconomics Fall 2016 1. The estimated
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• The estimated demand function for pork is:
• How does the equilibrium price of pork vary as the income (Y) if the variables that affect demand are held constant at their typical values (using the values .5, pb = 4, pc = 3.33 and .50)? (Hint: calculate  ).
• Given the demand function above with all the values, what would be the cross-price elasticity between the price of chicken (pc) and the quantity of pork?

• Please read the news following the link: http://www.wsj.com/articles/airline-fare-riddle-one-route-two-prices-1420676518. The article has also been posted with this problem set. Please use supply-demand analysis to explain the phenomena that the air fares could be different for the same route with different directions. You might want to discuss the reasons behind the high demand for a selected originating market, price elasticity of demand might also help in explaining the high price of a specific direction. Further online search and study about differential airline pricing for the same route is encouraged.

ECON 3010 Intermediate Microeconomics Fall 2016 1. The estimated demand function for pork is: Q=171?20 p+20 pb +3 pc +2 Y

The estimated supply function for pork is: Q=178+ 40 p?60 ph

(1) How does the equilibrium price of pork vary as the income (Y) if the variables that

affect demand are held constant at their typical values (using the values Y=12.5, pb =

4, pc = 3.33 and ph=1.50)? (Hint: calculate ?p

?Y ). (2) Given the demand function above with all the values, what would be the cross-price

elasticity between the price of chicken (pc) and the quantity of pork? 2. Please read the news following the link: http://www.wsj.com/articles/airline-fare-riddleone-route-two-prices-1420676518. The article has also been posted with this problem set.

Please use supply-demand analysis to explain the phenomena that the air fares could be

different for the same route with different directions. You might want to discuss the

reasons behind the high demand for a selected originating market, price elasticity of

demand might also help in explaining the high price of a specific direction. Further online

search and study about differential airline pricing for the same route is encouraged.

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This question was answered on: Feb 21, 2020

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