Find the price at which price elasticity of demand

Assignment Help Business Economics

Reference no: EM13995800

1. Due to the recession that lowered income, the market price of good X got lower. For good X, we assume that Qd(P) = 100 - P + Y/20, and Qs(P) = 2P - Y/20, where Y is the income, and P is the price of good X.

a) Derive the equilibrium price P* in terms of Y.

b) Use your answer to (a) to show the effect of income on equilibrium price, that is, find dP*/dY.

2. Suppose that the demand function for good Y is given as a linear function: Qd(P) = 120-2P, where P is the price of good Y.

a) Find the price at which price elasticity of demand for Y is -1.

Reference no: EM13995800

Questions Cloud

The marginal benefit of the first bottle : It is a hot day at the beach. Ice water costs $2 per bottle and this is your only option. Your marginal benefit for water follows the equation MB = $10 - $x. x is represents the number of bottles of ice water you have had. So, for example, the margin..

What would be opportunity cost of growing another apple tree : Farmer Brian has 3 acres of land which he farms efficiently. Each acre can support 20 apple trees. However the 3 acres differ in their ability to support orange trees. what would be the opportunity cost of growing another apple tree?

What will it cost the firm to acquire a transmission : An auto company can buy transmissions for $400 from one of several suppliers or it can make the equivalent transmission for $420. However, to assure it sells a quality product it has to do incoming inspection on every transmission and the firm’s cost..

Assume calvin can make a fractional investment : Calvin is risk averse with V(W) = √W. Assume Calvin has initial wealth W = 10 and can make an investment that pays double or nothing with a probability of success of 60%. How much will Calvin choose to invest? Assume Calvin can make a fractional inve..

Find the price at which price elasticity of demand : 1. Due to the recession that lowered income, the market price of good X got lower. For good X, we assume that Qd(P) = 100 - P + Y/20, and Qs(P) = 2P - Y/20, where Y is the income, and P is the price of good X. Derive the equilibrium price P* in terms..

Respect for private property : One of the basic tenets of the American government is respect for private property. Why, in your mind, is this so critical? Many countries throughout the world do not place high value on private property believing that property in private hands leads..

What will happen to aggregate demand : Consumer and investor optimism and pessimism matter a great deal in the economy. Suppose that survey measures of consumer confidence indicate a wave of pessimism is sweeping the country. If policymakers do nothing, what will happen to aggregate deman..

What is the net cash flow after taxes for the year : For a particular year, a company has gross annual income of $780,000, annual expenses of $270,000, and allowed depreciation of $60,000. The company is located in a state where the first $200,000 corporate income is tax-free, and any income above that..

Indicate about the chargeback rates : Your local fast food chain with two dozen stores uses the company's internal corporate marketed department to produce signage, print ads, in-store displays, and so forth. When placing an order, store managers are assessed a chargeback (transfer price..

User Account

All Pages