Question;Managerial;Economics and Globalization ? ECO 550;Week 1 Problem Set;1. In each of the following examples, discuss which;market model appears to best explain the behavior described;a. Dry weather unexpectedly cut the 2003 soybean;harvest by 15 percent, making it the smallest harvest in seven years. China;increased its demand for soybeans, acquiring a record 300 million U.S bushels;between September 2003 and April 2004. The Bush administration expected that;U.S farmers would respond to the high prices by planting more soybeans in the;next cycles.;b. In spring 2004, General Motors launched another;round of discounts, offering zero percent financing for five-year loans and;$1,000 additional givebacks to customers. Following GM?s move, Ford increased;rebates on certain pickup models from $1,000 to $1,500, while DaimlerChrysler;announced that 2005 minivans would come with a $1,000 rebate.;c. In spring 2004, the U.S. wireless telecommunications;industry hoped that mergers among firms would decrease the number of rivals and;eliminate cutthroat competition. However, the wireless carriers faced new;challenges from new technologies and a rush of new entrants into the market.;Unlike their counterparts in the traditional phone industry, wireless companies;never enjoyed a period of monopoly status.;d. Chinese cooking is the most popular food;in America that isn?t dominated by the big national chains. Chinese food is;typically cooked in a wok that requires high heat and a special stove.;Specialized chefs are also required. Small mom-and-pop restaurants comprise;nearly all of the nation?s 36,000 Chinese restaurants, which have more;locations than McDonald?s, Burger King, and Wendy?s combined.;2. Consider the demand for computers. For each of;the following, state the effect on demand;a. An increase in consumer incomes-;b. An increase in the price of computers-;c. A decrease in the price of Internet service;providers-;d. A decrease in the price of semiconductors-;e. It is October, and consumers expect that;computers will go on sale just before;3. The demand curve is given by;QD = 500 ? 5Px + 0.5I + 10PY ? 2 PZ;Where;QD=;quantity demand of good X;Px = price of good X;I = consumer income, in thousands;PY = price of good Y;PZ = price of good Z.;Based upon the demand;curve above, is X a normal good? Justify your answer.Based upon the demand curve above, what is the;relationship between good X and good Y? Justify your answer.Based upon the demand;curve above, what is the relationship between good X and good Z? Justify your;answer.What is the equation of the demand curve if;consumer incomes are $30,000, the price of good Y is $10, and the price of good;Z is $20?4. Suppose that the demand and supply curves for a;product are given by:QD = 500 ? 2PQS = -100 + 3P;Algebraically find the;equilibrium price and quantity.If the current price of the product is $100;what would be the quantity demanded and the quantity supplied? How would you;describe this situation, and what would you expect to happen in this market?c. If the current price of the product is $150;what would be the quantity demanded and the quantity supplied? How would you;describe this situation, and what would you expect to happen in this market?
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