Solve problem 10:(b) and (d) 11:(a) 10. Market Equilibrium and Taxes 40 points t

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Solve problem 10:(b) and (d) 11:(a)

10. Market Equilibrium and Taxes 40 points total uppose that the demand and supply of aglets, the plastic/metal-fip at the end of most shoelaces, can be modeled by the following two equations: Qd-10,000-20p Q,--1,000 + 10p (a) Find the equilibrium price and quantity, and graph your results, being sure to label (b) On your graph, identify the elastic and inelastic portions of the demand curve. 5 points everything relevant, including intercepts and slopes. 15 points (c) Now suppose that the government imposes a T = $100 tax on suppliers. Find the new equilibrium price and quantity. Show the effect of the tax in yonur graph from part (a). 15 points (d) Of the $100 tax, how much do consumers pay? How much do suppliers pay? Hint: consider usingEpoints] 11. Optimal Consumption 20 points total Karl enjoys going to adult classes after work. In particular, he must choose between painting (P) classes and cooking (C). Karl has $100.00 to spend a week on these two classes. The cost. of the painting/wine class is $10.00 per class whereas the cooking class costs $5.00 per class. Put formally, Karl's optimization problem is: max U( P,C C) = PC s.t. 10W + 5C = 100 (a) Construct a graph to represent Karl's maximization problem. 5 points (b) Using your preferred solution technique, solve for Karl's optimal bundle of painting an cooking classes, ie. (,C"). | 15 points

Explanation / Answer

Each piece of economic theory is first introduced and explained in the context of a specific

application. Most are reused in other chapters, so students see them in action on multiple

occasions. As students progress through the book, they accumulate a set of techniques and

ideas. These are collected separately in a “toolkit” that provides students with an easy

reference and also gives them a condensed summary of economic principles for exam

preparation.

A Truly International Book

International economics is not an afterthought in our book; it is integrated

throughout.

Many other texts pay lip service to international content. We have taught in numerous

countries in Europe, North America, and Asia, and we use that expertise to write a book that

deals with economics in a globalized world.

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