Question

In: Economics

The demand functions for two commodities, A and B, are given by QA=AP-0.5Y0.5 and QB=BP-1.5Y1.5 (a)...

The demand functions for two commodities, A and B, are given by QA=AP-0.5Y0.5 and QB=BP-1.5Y1.5

(a) Find the price elasticity of demand for each good and hence comment on the relative sensitivity of demand due to changes in price.

(b) Find the income elasticity of demand for each good. Which good is normal and which is superior? Give a reason for your answer.

Solutions

Expert Solution


Related Solutions

The demand functions for two commodities, A and B, are given by QA = AP?0.5Y0.5 and...
The demand functions for two commodities, A and B, are given by QA = AP?0.5Y0.5 and QB = BP?1.5Y1.5 (a) Find the price elasticity of demand for each good and hence comment on the rela- tive sensitivity of demand due to changes in price. (b) Find the income elasticity of demand for each good. Which good is normal and which is superior? Give a reason for your answer.
There are two firms, A and B producing differentiated products. Their demand curves are: qA=100-2PA+3PB qB=120-2PB+2PA...
There are two firms, A and B producing differentiated products. Their demand curves are: qA=100-2PA+3PB qB=120-2PB+2PA and both have MC=5. Note that demand curves are not symmetric. Assuming that firms are engaged in Bertrand price competition: (a)Write down the profit function of firm A and find its price response function Hint: πA=(PA-5)(100-2PA+3PB) (b) Write down the profit function of firm B and find its price response function (c) Find equilibrium prices PA and PB; equilibrium quantities qA and qB; and...
Find the electric field at the location of Qa. given that qb = +8.10 µC and...
Find the electric field at the location of Qa. given that qb = +8.10 µC and qc = –5.50 µC. Point charges located at the corners of an equilateral triangle 22.0 cm on a side.
Consider two countries, A and B, whose respective industries produce goods qA and qB. Total world...
Consider two countries, A and B, whose respective industries produce goods qA and qB. Total world output of the good is given by Q=qA+qB. There is a world demand given by p=102-Q. Suppose that the cost function for country A is given by CA(qA)=7qA while the cost function in country B is given by CB(qB)=3qB. The production of the good generates greenhouse gas emissions which cause global climate change. Total world emissions are 0.5 per unit of good, such that...
A firm produces two commodities, A and B. The inverse demand functions are: pA =900−2x−2y, pB...
A firm produces two commodities, A and B. The inverse demand functions are: pA =900−2x−2y, pB =1400−2x−4y respectively, where the firm produces and sells x units of commodity A and y units of commodity B. Its costs are given by: CA =7000+100x+x^2 and CB =10000+6y^2 where A, a and b are positive constants. (a) Show that the firms total profit is given by: π(x,y)=−3x^2 −10y^2 −4xy+800x+1400y−17000. (b) Assume π(x, y) has a maximum point. Find, step by step, the production...
Problem #5 : a) Two positive charges, Qa and Qb are placed on opposite sides of...
Problem #5 : a) Two positive charges, Qa and Qb are placed on opposite sides of a grounded sphere of radius R at distances of 3R and 6R, respectively, from the sphere center. Show that Qb is repelled from the sphere if Qb < QA * (72275/87723) b) A infinite wire with line charge density λ is placed a distance d above a grounded conducting plane. Assume that the wire is parallel to the x-axis and is located at in...
The demand for Apples (Qa) is given by Qa = 100 - 1Pa + .5Pb -...
The demand for Apples (Qa) is given by Qa = 100 - 1Pa + .5Pb - 0.01I, where Pa is the price of Apples, Pb is the price of Bananas, and I is the income. Calculate the price elasticity demand for Apples when Pa is between 2 and 3, Pb = 1, and I = 500. Is the demand for Apples elastic, unit-elastic, or inelastic? Calculate the cross-price elasticity demand for Apples when Pb is between 1 and 2, Pa...
The demand for Apples (Qa) is given by Qa = 100 - 1Pa + .5Pb -...
The demand for Apples (Qa) is given by Qa = 100 - 1Pa + .5Pb - 0.01I, where Pa is the price of Apples, Pb is the price of Bananas, and I is the income. a. Calculate the price elasticity demand for Apples when Pa is between 2 and 3, Pb = 1, and I = 500. Is the demand for Apples elastic, unit-elastic, or inelastic? b. Calculate the cross-price elasticity demand for Apples when Pb is between 1 and...
Suppose that the demand for artichokes (Qa) is given as: Qa = 120 - 4P a....
Suppose that the demand for artichokes (Qa) is given as: Qa = 120 - 4P a. What is the point price elasticity of demand if the price of artichokes is $10? b. Suppose that the price of artichokes increases to $12. What will happen to the number of artichokes sold and the total expenditure by consumers on artichokes? c. At what price if any is the demand for artichokes unit elastic?
uppose that demand is given by qa = 32 – pa in Market A and by...
uppose that demand is given by qa = 32 – pa in Market A and by qb = 40 – pb in Market B where pi, and qi are price and output in market i = a, b, respectively. Marginal cost is constant and equal to 4. Fixed costs are zero. b)   . Find the profit maximizing prices, quantities and profit if the monopolist can price discriminate. c)   . Find the profit-maximizing price, quantity and profit if the monopolist cannot...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT