Reference no: EM132559162
Q.1. Calculate elasticity values for part a <br/>(a) Suppose firm XYZ (selling good x) has calculated its demand function from its past data & related variables and it arrives at the following demand function:
Dx = 11000 - 200 Px + 2Py + .05 I
Where: Px, Py and I stand for price of good x, price of related good y and average income respectively.
If given values are Py = Rs. 500 and I = Rs. 40,000 then:
i. Write the equation for demand curve for good x.
ii. If supply of x is given by: Sx = 3000 +200 Px , then make a demand and supply schedule for good x for prices points: 50, 45, 40, 35, 30, 25, 20 and 15 (all prices in rupees)
iii. What are equilibrium quantities of demand and supply & equilibrium price?
iv. What will happen to the demand curve if the income increases by 10%? Show your answer graphically.
(b) Mr. Shiva has inherited a piece of land from his father, which he has converted to a fruit orchard with 700 mango trees at zero cost. Each tree is leased out for the season at a rental price. The demand curve for trees is given by: Qh= 1200 - 1.5 Ph, then*: i. At what quantity & price value will the firm maximize TR?
ii. If after a month he starts incurring a maintainace cost of Rs. 200 per tree, then how will optimum quantity and TR change?
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