Question

In: Economics

Exercise 1.5* 1. Describe the effect on the demand curve due to an increase in (a)...

Exercise 1.5* 1. Describe the effect on the demand curve due to an increase in (a) the price of substitutable goods; (b) the price of complementary goods; (c) advertising expenditure. 2. If the line, P = -Q + 6, is sketched with P on the horizontal axis and Q on the verti- cal axis, find the gradient, m, and the vertical intercept, c. 3. If the demand function of a good is 2P + 3Qp = 60 where P and Qo denote price and quantity demanded, respectively, find the largest and smallest values of P for which this function is economically meaningful. 4. The demand and supply functions of a good are given by P = -52, + 80 P = 2Qs + 10 where P, Q, and Qs denote price, quantity demanded and quantity supplied, respectively. (1) Find the equilibrium price and quantity (a) graphically; (b) algebraically (2) If the government deducts, as tax, 15% of the market price of each good, determine the new equilibrium price and quantity.

Expert Solution

Explanation:-

1.The effect on the demand curve due to an increase in

a.The price of substitutable goods;

rightward shift in the demand curve

b .The price of complementary goods;

Leftward shift in the demand curve

c. Advertising expenditure;

rightward shift in the demand curve .

Demand for a commodity and price of its substitutes move in the same direction, whereas demand for a commodity and price of a compliment move in the oppsite direction. A positive advertising will increase the demand.

2.

Gradient ( slope) of the demand curve is( —)2/3 , whereas vertical ( price) intercept will be 6

Gradient is called the slope of the demand curve which is represented by the( \Delta P/\DeltaQ). Price intercept shows the price at which quantity demand is zero.

3.

Largest value of P = 30 where quantity demand is zero and smallest value of p is zero where quantity demand is 20.

If you have any dought about thus answer dont give dislike ,tell us your dought in the comment then i can explain, Please rate me by giving me a like or thumb because it motivates me to do more work,Thank you.

Rahul Sunny answered 1 year ago

Phillips Curve Exercise 1 a. A positive demand shock to the economy will have what effect...

Phillips Curve Exercise 1 a. A positive demand shock to the economy will have what effect in the short run? An increase in inflation, but a decrease in real GDP A decrease in both inflation and real GDP An increase in both inflation and real GDP A decrease in inflation, but an increase in real GDP b. A negative demand shock to the economy will have what effect in the short run? A decrease in both inflation and real GDP...

Describe the effect of the following events would on the aggregate demand (AD) curve in the...

Describe the effect of the following events would on the aggregate demand (AD) curve in the U.S. Answer with SR= shifts right, SL=shifts left, MU=move up curve, or MD=move down curve. (a) A boost in research and development by computer companies produces more powerful and efficient computers and equipment. _ (b) Income falls in several countries that trade heavily with the U.S. (c) Prices fall in the economy. (d) After a budget surplus, Congress moves to cut personal income taxes.

Demand and supply. Show in a diagram the effect on the demand curve, the supply curve,...

Demand and supply. Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price and quantity of each of the following pairs of events. a. The market for hand-sanitizers in New York at the beginning of April 2020. i. The number of Covid-19 cases increases exponentially starting from 1st March 2020; ii. On March 9, 2020 New York State Governor Andrew Cuomo allowed for state production of hand-sanitizers. b. The market for touristic services in...

Effect on demand and supply due to the onset of a pandemic

If the elasticity of demand is -1.5 and there is a 10% price increase, do total...

If the elasticity of demand is -1.5 and there is a 10% price increase, do total revenues increase or decrease? Explain how you arrived at your answer. By what percentage do the revenues change?

For the following identify the effect on the supply and the demand curve and on the...

For the following identify the effect on the supply and the demand curve and on the equilibrium price and quantity: Fast foods - The government has placed a tax on restaurants serving foods high trans fat and saturated fat. People have found out that foods high in trans fat and saturated fat are harmful to one’s health

show in a diagram the effect on the demand curve(if applicable), the supply curve(if applicable), the...

show in a diagram the effect on the demand curve(if applicable), the supply curve(if applicable), the equilibrium price, and the equilbrium quantity of each of the following events .Then state clearly what happens to the equilibrium price and quantity. a. the market for steel in the us. Fuel efficiency regulatons have reduced the use of steel in automobile production and increased the use of lighters materials such as aluminum, and (ii) import restrictions limit the amount of steel that can...

Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price,...

Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of each of the following events. a. The market for steel in the United States: Fuel efficiency regulations have reduced the use of steel in automobile production and increased the use of lighter materials such as aluminum AND import restrictions limit the amount of steel that can be imported into the United States. b. The market for international airline tickets:...

An increase in investment creates a in aggregate demand, the aggregate demand curve shifts...

An increase in investment creates a ______ ______ in aggregate demand, the aggregate demand curve shifts ________ potentially brining ________ phase of the business cycle. larger; increase; rightward; expansion larger; decreases; leftward; recession smaller; increases; rightward; expansion smaller; decreases; leftward; recession

Using the concepts of the income effect and substitution effect, explain why the demand curve is...

Using the concepts of the income effect and substitution effect, explain why the demand curve is usually downward sloping.