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Equivalent annual net benefit method

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Reference no: EM133077377

A. A person's demand for a good is given by the following equation:q = 7 - 0.4p + 0.0002I where, q is the quantity demanded at price p when the person's income is I. Assume initially that the person's income is $50,000.

i. At what price will demand fall to zero?

ii. If the market price for the good is $10, how many will be demanded?

iii. At a price of $10, what is the price elasticity of demand for the good? Explain.

iv. At a price of $10, what is the consumer surplus?

v. If price drops to $5, how much consumer surplus is gained?

vi. If income were $70,000, what would be the consumer surplus loss from a price rise from $10 to $15?

B. At the current market equilibrium, the price of a good equals $50 and the quantity equals 10 units. At this equilibrium, the price elasticity of supply is 2.0. Assume that the supply schedule is linear. Use the price elasticity and market equilibrium to find the supply schedule

C. What is the main use of equivalent annual net benefit method?

Reference no: EM133077377

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