ECO333H1 Study Guide - Midterm Guide: Land Rover Dc100, Exogeny, Indifference Curve
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Question 1: (2 marks) rb(x,w) is derived as follows: (1,200)(80) = 25,000 + (4)(1,200)x + 20w + 0. 5rb(x,w) Rb(x,w) = 142,000 9,600x 40w: (8 marks 4 marks for deriving x1(w) and 4 marks for deriving rr(x,w)) First set p(x,w) = (w 250 80(x x1(w)))/1000 and (32,000)p(x,w) = 38,400 + 4rr(x,w). These are the budget constraint for residents and zep condition for housing firms, respectively. Then use densities to show that x2(w) = 6x1(w). 3,600 = [2,700 w** ts(x1** x1*)]8 (you are told that the fall in residential bid rent during stage 2 is ,600 everywhere, and it can be shown that rs = psq/lr where. Ps = [w* w** ts(x1** x1*)]/h is the corresponding fall in the house price; that is, the fall in housing costs is equal to the fall in the wage less the fall in commuting costs during. Stage 2 adjustment (for all residents) induced by the eastward movement of the cbd.
