Problem: Suppose that the demand for Cod Liver Oil (CLO) can be written QD =5000-2P (so,...

Problem: Suppose that the demand for Cod Liver Oil (CLO) can be written QD =5000-2P (so, the inverse demand curve for CLO is P=2500-0.5QD), where P is the price per ton (in dollars) of CLO and QD is the quantity demanded (in tons) in a period. a) Calculate price elasticity of demand (using the point elasticity formula) at the following amounts of CLO along this demand curve: QD=4000, QD =2500, QD =1000. b) Calculate total revenue from sales in this market at QD =2500. Show your work please. d) Assume that demand will decrease based on a parallel shift of the demand curve. Explain what will happen to elasticity at QD=2500 (will it increase or decrease and why?). What will happen to total revenue at this quantity (will it increase or decrease and why?). Will the maximum total revenue for the market be achieved at a greater or a smaller quantity than QD=2500?

Solutions

Expert Solution

Rahul Sunny answered 7 months ago

Next > < Previous

Related Solutions

Suppose demand and supply can be characterized by the following equations: Qd = 6 – 2P...

Suppose demand and supply can be characterized by the following equations: Qd = 6 – 2P Qs = P Price is in dollars; quantity is in widgets. For parts (c) and (d), assume a tax of $1.50 per widget sold is imposed on sellers. Show your work for each step below. C. Find the equilibrium price buyers pay, price sellers get, and quantity algebraically. D. Calculate the following: consumer surplus producer surplus total firm revenue production costs total tax revenue...

Suppose the demand function for corn is Qd = 10-2p, and supply function is Qs =...

Suppose the demand function for corn is Qd = 10-2p, and supply function is Qs = 3p-5. The government is concerned that the market equilibrium price of corn is too low and would like to implement a price support policy to protect the farmers. By implementing the price support policy, the government sets a support price and purchases the extra supply at the support price and then gives it away to the consumers free. The government sets the support price...

Suppose Market demand is given as Qd = 60 – 2P. Market supply is given as...

Suppose Market demand is given as Qd = 60 – 2P. Market supply is given as Qs = 2P Also assume ATC = 0.4Q. a. How many units of the product would the perfectly competitive market supply? What would the equilibrium price be? b. What are the profit maximizing price and quantity if this market is a monopoly? c. Calculate the dead-weight loss created if this market started off as perfectly competitive but then became a monopoly.

Taxes qd= 12-3p qs= -2+2p Using the supply and demand functions from problem 1, suppose a...

Taxes qd= 12-3p qs= -2+2p Using the supply and demand functions from problem 1, suppose a per unit tax of 1 were charged to the buyer. a) How much does the buyer pay? b) How much does the seller receive? c) What is the equilibrium quantity? d) How much tax revenue is generated? e) How much tax burden do the buyer and seller each bear? f) Calculate the consumer surplus, producer surplus, welfare level, and dead weight loss with this...

suppose the supply curve and demand curve for the market of shoes is as follows: Qd=30-2p ...

suppose the supply curve and demand curve for the market of shoes is as follows: Qd=30-2p Qs=15+p Find equilibrium P and Q suppose a $2 / unit tax is imposed on the seller. Find the new equilibrium Q, Pb and Ps. Now rework the problem with at $2 / unit subsidy (a subsidy is the opposite of tax)

Suppose the supply curve and demand curve for the market of shoes is as follows: Qd=30-2P...

Suppose the supply curve and demand curve for the market of shoes is as follows: Qd=30-2P Qs=15+P Suppose a $2 tax is imposed on the buyer. Find the new equilibrium Q, Pb and Ps. SHOW YOUR WORK. Suppose a $2 subsidy is imposed on the seller. Find the new equilibrium Q, Pb and Ps. Show your work.

1. Suppose you have a demand function and supply function of QD = 300 - 2P...

1. Suppose you have a demand function and supply function of QD = 300 - 2P and QS = 5P, respectively. a. Suppose tax of $50 has been levied on the consumer. What is the new demand curve? b. Draw both demand curves and the supply curve on one graph. c. After the tax has been applied, what is the price that the sellers receive? d. After the tax has been applied, what is the price that the consumers pay?...

The demand and supply for a product is given by: Qd: 120-4P and Qs: 2P+60 Suppose...

The demand and supply for a product is given by: Qd: 120-4P and Qs: 2P+60 Suppose the government imposes a price ceiling of P=$8 calculate: 1) consumer surplus after the price ceiling 2) Producer surplus after the price ceiling 3) Deadweight Loss

The market demand function for corn is Qd = 25 - 2P The market...

The market demand function for corn is Qd = 25 - 2P The market supply function is Qs = 5P -3 both measured in billions of bushels per year. What would be the welfare effects of a policy that put a cap of $3.50 per bushel on the price farmers can charge for corn? (Assume that corn is purchased by the consumers who place the highest value on it.) Instructions: Round quantities to one decimal place....

The market demand function for corn is Qd = 28 - 2P The market...

The market demand function for corn is Qd = 28 - 2P The market supply function is Qs = 5P -4 both measured in billions of bushels per year. What would be the welfare effects of a policy that put a cap of $4.00 per bushel on the price farmers can charge for corn? (Assume that corn is purchased by the consumers who place the highest value on it.) Instructions: Round quantities to one decimal place....

Subjects