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1. Suppose the demand for shoelace eyelets is represented by the equation:
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Write My Essay For MeD = 60-p, where p is price, and that supply is represented by the equation S=10+2p-w, where w is the wage rate for eyelet factory workers.
a) Assuming the market wage rate is $10/hour, what is the equilibrium price? What is the equilibrium quantity?
b) What are the equilibrium price and quantity if the wage increases to $15/hr?
c) Use the changes in price and quantity demanded above to calculate the price elasticity of demand. Interpret your result (i.e. what does the elasticity you calculate mean?).
2) In the last 100 years in the U.S. real incomes have risen while the number of children per family has decreased. Answer the following questions:
a) Does this mean that children are inferior goods? Explain.
b) Does this mean that the cost of having children is rising faster in the U.S. than real incomes? Explain.
c) Offer an alternative explanation, using economic theory.
