1. Homework Assignment #1 Problems 1 and 2 Due 4-22-2010 hybrid 4-23-2010 non-hybrid

2. Problems #1 and 2 Multi-part In the summer of 2007 OPEC, the Organization of Petroleum Exporting Countries, decreased the cartel’s production quota, resulting in an increase in the price of oil. 1. Show the impact of the increase in the price of oil on the market for automobile gasoline. a. Which curve, demand or supply, shifts and which factor caused it to shift? b. What would be the impact on the market for more fuel efficient cars (and why) like the Prius (a hybrid)? The impact on the market for less fuel efficient cars (like Humvees) and why? 2. What would be the impact of the oil price increase on the market for alternative fuels, such as biodiesel?

3. Problem 2 Compute and Fill-In Missing Data PriceIndiv 1Indiv 2Indiv 3Indiv 4Market DemandTotal RevenueMarginal Revenue $1010001 $920114$36$26 $83121 $74132 $65242 $56253 $47363 $38364 $2946423$46 $11046525$25($21)

4. Problem #3 Compute the market demand curve for the 4 individuals in this market – Market demand = sum of individual demand at each price offered Calculate total revenues at each price – Total Revenue = Price x Quantity Demanded at that Price TR(P) = P x Q(P) Calculate the Marginal Revenue at each price – Marginal Revenue = Change in Total Revenue E.g., MR($9) = TR($9) – TR($10) Calculate the own-price demand elasticity – The percentage change in quantity demanded with the percentage change in price