Reference no: EM132497053
Question 1: Bert, as a consumer, places the value on a pair of jeans as follows.
Value of first pair: $70
Value of second pair: $60
Value of third pair: $50
Value of fourth pair: $40
Value of fifth pair: $30
Value of sixth pair: $20
Value of seventh pair: $10
Ernie, as a producer, pays the following cost to produce jeans.
Cost of first pair: $10
Cost of second pair: $20
Cost of third pair: $30
Cost of fourth pair: $40
Cost of fifth pair: $50
Cost of sixth pair: $60
Cost of seventh pair: $70
Using the information given above, answer the following questions.
(1) If the price is $20, how many pairs of jeans will be demanded by Bert?
(2) Explain the reason why $30 price is not an equilibrium price.
Question 2: The demand function for product X is given by Qx = 300 - 2Px.
(1) Derive the equation for the inverse demand function for product X.
(2) Assume that product X is a divisible good. Compute the consumer surplus at Px = $45.
Question 3: Bert, as a consumer, places the value on a pair of jeans as follows.
Value of first pair: $70
Value of second pair: $60
Value of third pair: $50
Value of fourth pair: $40
Value of fifth pair: $30
Value of sixth pair: $20
Value of seventh pair: $10
Ernie, as a producer, pays the following cost to produce jeans.
Cost of first pair: $10
Cost of second pair: $20
Cost of third pair: $30
Cost of fourth pair: $40
Cost of fifth pair: $50
Cost of sixth pair: $60
Cost of seventh pair: $70
Using the information given above, answer the following questions.
(1) If five pairs of jeans were ordered, what price will Ernie charge per pair? What kind of function is being used to answer the question?
(2) If five pairs of jeans are available to buy, what price is Bert willing to pay per pair? What kind of function is being used to answer the question?
(3) If the price is $40, what is the size of the consumer surplus?
(4) If the price is $40, what is the size of the producer surplus?
Question 4: Assume that turkey meatball and beef meatball are substitutes. Also note that turkey and turkey meatball are two different objects; turkey is a material to make turkey meatball. The same caution applies to beef and beef meatball.
(1) We observe that the equilibrium quantity of turkey meatball falls. Explain whether or not a rise in the price of turkey is responsible for this observation.
(2) We also observe that the equilibrium price of beef meatball rises. Explain whether or not a rise in the price of turkey is responsible for this observation.