Eco100y5 Tt1 2012f Michaelho
Eco100y5 Tt1 2012f Michaelho
Eco100y5 Tt1 2012f Michaelho
UNIVERSITY OF TORONTO
DEPARTMENT OF ECONOMICS
INTRODUCTION TO ECONOMICS ECO100Y
LEC0301 & LEC6001
MICHAEL HO
TEST 1 SOLUTIONS
OCTOBER 19
TH
, 2012
Name:
ID#:
Tutorial #:
IMPORTANT:
If you do not provide the correct Tutorial #, then your test will be graded later.
Do not use red-coloured pen (this colour is reserved for the markers) and avoid using pencil in your
answer because you cannot appeal any part of your answer if it is done in pencil (except the diagram
in Question 2).
You must show the step-by-step calculations in every part of Question 1 or a zero will be given.
You must relate your explanation in Question 2 to your diagram for full marks.
Only put your answers in the designated page(s) or space.
Do not separate any page from this test.
Question 1 Question 2
Questions
3 to 7
Total
Marks 50 25 25 100
Score
Version A Page 2of 3
1. Suppose in the market for ECO100 private tutoring the supply curve is and the
demand curve is , where is the price of private tutoring per hour and is the
number of hours of private tutoring. (Note: Part (d) requires you to plot all your results)
1. (a) Show how to solve for equilibrium number of hours
of private
tutoring, total revenue to the tutors
, consumer surplus
, producer surplus
, and
total surplus
. (18 marks)
1. (b) Suppose the government believes the tutors cannot earn a decent living at the equilibrium
price
from part (a) and it legislates to change the price of private tutoring by an hour
with a binding price floor
, consumer surplus
, producer
surplus
. (18 marks)
1. (c) Can the price floor policy raise the total revenue for the tutors? Why? (8 marks)
The demand curve between (
) and (
and
quantity