Question

In: Economics

. The following is the annual demand function for good A:                 QDA = 400 –...

. The following is the annual demand function for good A:

                QDA = 400 – 20PA + 10PB + 0.01Y

where PA is the price of good A; PB is the price of another good, good B; Y is income.

  1. Is good A a normal good or an inferior good? Explain.
  2. Is good B a complement or a substitute for good A? Explain.

Assume that the current price of good B is £5, income is £50 000, and the annual supply function for good A is:

                QSA = 100 + 10PA

  1. Calculate the equilibrium price and quantity.
  1. Calculate price elasticity of demand if the price of good A rises by £5 from the equillibrium price and the demand decreases by 7% and what does this show about the product ?

  1. Calculate the price elasticity of supply if the amount supplied increases by 26.60 units (from the equillibrium) and this results in a decrease in price of 4%. Suggest what this figure shows             

Solutions

Expert Solution

Rahul Sunny answered 1 month ago
Next > < Previous

Related Solutions

    31. The following is the annual demand function for good A:                 QDA = 400...
    31. The following is the annual demand function for good A:                 QDA = 400 – 20PA + 10PB + 0.01Y where PA is the price of good A; PB is the price of another good, good B; Y is income. Is good A a normal good or an inferior good? Explain. Is good B a complement or a substitute for good A? Explain. Assume that the current price of good B is £5, income is £50 000, and...
2) The demand function for a good is ?? = ?(?, ?, ?) = ? −...
2) The demand function for a good is ?? = ?(?, ?, ?) = ? − ?? and its supply function is ?? = ?(?, ?, ?) = ? + ??, where a, b, c, and e are positive constants. (Keep in mind that sometimes we call a, 2 b, c, and e “parameters” and that they are “exogenous” variables. In contrast, p and Q are “endogenous” variables.) a) Solve for the equilibrium price ? ∗ = ? ∗ (?,...
Suppose I estimate the following demand function for a tv: Q = 400 - 3P +...
Suppose I estimate the following demand function for a tv: Q = 400 - 3P + 4T + .6A Where: Q = quantity demanded in units P = price in dollars T = tastes and preferences A = Advertising expenditures in dollars We are currently operating at the following values: A = 10,000 T = 8000 P = 2800 In addition, suppose MC is 2800 Given all this, please answer the following questions: A.   Derive the firm's current demand curve and...
a. Define the demand function of a good, and then discuss the price elasticity of demand...
a. Define the demand function of a good, and then discuss the price elasticity of demand for agricultural product such as rice. b. Use a demand/supply diagram to discuss why rice farmers may not benefit from a technological improvement in producing rice.
a. Define the demand function of a good, and then discuss the price elasticity of demand...
a. Define the demand function of a good, and then discuss the price elasticity of demand for agricultural product such as rice. b. Use a demand/supply diagram to discuss why rice farmers may not benefit from a technological improvement in producing rice.
Consider the following demand function for game consoles: (D): P = 400 - 20Q 1. Assume...
Consider the following demand function for game consoles: (D): P = 400 - 20Q 1. Assume that the price decreases from 150$ to 100$. a. Calculate the price elasticity of demand.(midpoint method ) b. Is the demand elastic, inelastic or unit elastic? c. What happens to Total Revenue? 2. Assume that the price decreases from 75$ to 50$. a. Calculate the price elasticity of demand.(mid point method ) b. Is the demand elastic, inelastic or unit elastic? c. What happens...
T or F question If a good is a normal good, does the demand function must...
T or F question If a good is a normal good, does the demand function must have a negative slope? If a good is inferior, does the demand function must have a positive slope? interpret your answer, please.
The demand function for a good is given as Q = 130-10P.
The demand function for a good is given as Q = 130-10P.  Fixed costs associated with producing that good are €60 and each unit produced costs an extra €4. i). Obtain an expression for total revenue and total costs in terms of Q ii). For what values of Q does the firm break even iii). Obtain an expression for profit in terms of Q and sketch its graph iv). Use the graph to confirm your answer to (ii) and to...
Q1=40-0.5P1 is the demand function of good 1.Assume (i) That the linear demand function for another...
Q1=40-0.5P1 is the demand function of good 1.Assume (i) That the linear demand function for another commodity good 2 intersects this function at the point P1=8 (ii) Show that the price elasticity of demand for good 1,ED1 is half that of good 2 at the point of intersection and express the demand function for good 2 in algebraic form
The demand curve for a good is given by the linear function Qd = 60 -...
The demand curve for a good is given by the linear function Qd = 60 - P, where P is the price buyers pay for the good and Qd is the quantity of the good demanded. The supply curve for the good is given by the linear function Qs = 2P, where P is the price sellers receive for the good and Qs is the quantity of the good supplied. If a tax of $12 per unit is levied on...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT