Question

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.

Answer 1

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.