Price	Quantity Demanded	Quantity Supplied
0.00	1350	0
5.00	1200	300
10.00	1050	600
15.00	900	900
20.00	750	1200
25.00	600	1500
30.00	450	1800
35.00	300	2100

 

a) The table shows the demand and supply schedules for tuna sashimi (sushi). Plot both Demand and Supply on a piece of paper and attach it as a photo to this document. Labeleverything that’s relevant and find the equilibrium price and quantity.

b) Calculate the consumer surplus, producer surplus, and total surplus at the market equilibrium.

c) Now suppose the mayor of Vancouver (who loves sushi) thinks the equilibrium market price of tuna sashimi is too high. Briefly describe how the mayor can use price controls to change the price so he is happy. Show this in the graph in part (a).

What is the interest parity condition?

An Individual consumes good X1 and X2. Let W be the wealth of the individual and P1>0, P2>0 be the prices of the goods. For each of the utility functions provide a real life example of two goods X1 and X2 that satisfy them, draw the indifference curves, determine whether preferences are convex, strictly convex or neither, and compute the Walrasian demand, indirect utility function, Hicksian demand, and Expenditure function.

1. U (X1, X2) =(X1^0.4) *(X^0.6)
2. U (X1, X2) =min (X1, X2) +3 max (X1, X2)

ABC plays football with the DEF Club in Mexico. If he does not suffer any injury by the end of the season, he will get a professional contract with GHI, which is worth 10,000 euros. If he is injured, he will get a contract as a fitness trainer in Ecuador, which is only worth 100 euros. The probability of suffering an injury is 10%. He is likely to get through the season unscathed with a 90%-probability.

1. Describe the gamble. How high is the expected value of this gamble?
2. How high is the expected utility, if his Bernoulli utility function of the VNM-utility function is u(x)=x^0.5?
3. Assuming he could buy insurance at the price P that would pay him 9,900 euro in the case of an accident, how high could the maximal value of P be for ABC to still afford the insurance?
4. Interpret the certainty equivalent. How high is the certainty equivalent c of the above gamble?
5. Calculate the coefficients of absolute risk aversion and interpret it. Is that a case of decreasing absolute risk aversion?