Question

25a. The university's food court is a competitive market for lunch combos. The inverse demand for lunch combos is ?=10−?10, where ? is the number of combos demanded and ? is the market price per combo. The inverse supply of lunch combos is given by ?=?5−2. 1st attempt Part 1 (2 points)See Hint The equilibrium quantity of lunch combos is , and the equilibrium price is $ per combo. Part 2 (2 points)See Hint The university wants to ensure that meals remain affordable, so it imposes a price ceiling per lunch combo of $3. With this price ceiling in place, the lunch combo market will exhibit a of units.

25b.

In a small city, Uver, a new ride service, has become very popular with the younger generation. The inverse demand for Uver rides is given by

?=70.00−??12p=70.00−QD12,

where ?Q is the number of rides demanded and ?p is the market price per ride. The inverse supply of rides is given by

?=35.00+??4p=35.00+QS4.


The local government in this small city is concerned that young people will walk less, which will have a negative effect on their health. The government is, therefore, considering charging Uver drivers a tax of $4.00 per ride.

1st attempt

Part 1   (1 point)

See Hint

If no tax is put in place, the equilibrium price is $    per Uver ride.

Part 2   (1 point)

See Hint

With the tax in place, the price paid by buyers per Uver ride will increase to $   .

Part 3   (1 point)

See Hint

With the tax in place, the after-tax price per ride received by Uver drivers will be $   .

Answer 1

25. a.

Part 1: 40; 6
(At equilibrium, demand = supply.
So, 10 - q/10 = q/5 - 2
So, 0.1q + 0.2q = 10 + 2
So, 0.3q = 12
So, q = 12/0.3 = 40
P = 10 - q/10 = 10 - 40/10 = 10 - 4 = 6)

Part 2: shortage of 45
(Qd: 3 = 10 - q/10 = 10 - 0.1q
So, 0.1q = 10 - 3 = 7
So, q = 7/0.1 = 70
Qs: 3 = q/5 - 2 = 0.2q - 2
So, 0.2q = 3 + 2 = 5
So, q = 5/0.2 = 25
So, shortage = qd - qs = 70 - 25 = 45)

25 b.

Part 1: 61.25
(At equilibrium, demand = supply.
So, 70.00−Q/12 = 35.00+Q/4
So, Q/4 + Q/12 = 70 - 35
So, 4Q/12 = 35
So, Q = 35*12/4 = 105
P = 35 + Q/4 = 35 + 105/4 = 35 + 26.25 = 61.25)

Part 2: 62.25
(p = 35 + Q/4 = 35 + 0.25Q
So, 0.25Q = 35 - p
So, 0.25Q = 35 - (p-t) = 35 - (p - 4) = 35 - p + 4 = 39 - p
So, p = 39 + 0.25Q = 39 + Q/4

At equilibrium, demand = new supply
So, 70.00−Q/12 = 39+Q/4
So, Q/4 + Q/12 = 70 - 39
So, 4Q/12 = 31
So, Q = 31*12/4 = 93
Pb = 70.00−Q/12 = 70.00−93/12 70 - 7.75 = 62.25

Part 3: 58.25
(Ps = 62.25 - 4 = 58.25)