ECON 3400H Managerial Economics Instructor: Sharif F. Khan

Department of Economics Trent University Fall 2012

Suggested Solutions to Assignment 1 (Optional)
Read each part of the question very carefully. Show all the steps of your calculations to get full marks. 1. End-of-chapter “Problems” # 2 of Chapter 4 of the textbook – Salvatore (7e). 2. End-of-chapter “Problems” # 3 of Chapter 4 of the textbook – Salvatore (7e). 3. End-of-chapter “Problems” # 4 of Chapter 4 of the textbook – Salvatore (7e). 4. End-of-chapter “Problems” # 6 of Chapter 4 of the textbook – Salvatore (7e). 5. End-of-chapter “Problems” # 9 of Chapter 4 of the textbook – Salvatore (7e). 6. End-of-chapter “Problems” # 10 of Chapter 4 of the textbook – Salvatore (7e). 7. End-of-chapter “Problems” # 12 of Chapter 4 of the textbook – Salvatore (7e). 8. End-of-chapter “Problems” # 13 of Chapter 4 of the textbook – Salvatore (7e). 9. End-of-chapter “Problems” # 15 of Chapter 4 of the textbook – Salvatore (7e). 10. End-of-chapter “Appendix Problems” # 1 of Appendix to Chapter 4 of the textbook – Salvatore (7e). 11. End-of-chapter “Appendix Problems” # 2 of Appendix to Chapter 4 of the textbook – Salvatore (7e).

ANSWERS TO PROBLEMS 1. PC (the price of Chevrolets) is expected to be inversely related to QC (the quantity demand of Chevrolets) because of the law of demand. N (the size of the population) is expected to be directly related to QC because a larger population usually means more purchases. I (disposable income) is also expected to be directly related to QC because Chevrolets are normal goods (for most people). PF (the price of Fords) is expected to be directly related to QC because Fords are substitutes for Chevrolets. PG (the price of gasoline) is expected to be inversely related to QC because gasoline is complementary to automobiles. A (the amount of advertising for Chevrolets) is