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IMI611S Intermediate Microeconomics Assignment
Problem 1
a) The demand function for roses is Q=200-0.4p, and the supply function is Q=100+0.4p+0.5t, where p is the price of roses and t is the average temperature in a month. Show how the equilibrium price varies with temperature.
b) The demand function for processed pork is Q = 100-P + 5Pb + Pc + 8Y and supply function for processed pork is Q = 50 + P-6Ph where Pb is the price of beef, Pc is the price of chicken, Ph is the price of hog and Y is the consumer income. Initial values are Pb=N$2, Pc=N$5, Y=N$100 and Ph=N$3. Draw the demand and supply curve for processed pork.
c) Suppose the market for wheat is competitive, with an upward-sloping supply curve, a downward-sloping demand curve, and an equilibrium price of N$4.00 per kilogram. Why would a price of N$8.00 per kilogram and N$3.00 kilogram not be an equilibrium prices?
Problem 2
a) Calculate and interpret the elasticity of demand for each of the following demand functions at point where price is N$12:
i. P = 65 - 0.4Q
ii. 4P + 2Q = 74
iii. Q = 60 - 0.5P
iv. 5P = 120 - 3Q
b) Is it true, as many people claim, that taxes assessed on producers are passed along to consumers? That is, do consumers pay for the entire tax?
Problem 3
a) True or false and explain. Illustrate with a graph where appropriate.
i) Rent control for apartments creates surplus of rental apartments.
ii) Since demand for agricultural products is inelastic, higher prices mean lower incomes for farmers.
b) Use appropriate diagrams to discuss the relationship between:
Total product of labour (TPL) and marginal product of labour and; Average product of labour and marginal product of labour.
Problem 4
a) Use appropriate diagrams to discuss the effect of a quota ) on the equilibrium price and equilibrium quantity of maize in the local market.
ASSIGNMENT 2
Problem 1
You are given the production function: Q(K, L) = 4K0.6L0.4
a) What is the average product of labour, holding capital fixed at K? Simplify fully
b) What is the marginal rate of technical substitution (MRTS)? Simplify fully
c) Does the above function exhibit increasing, decreasing or constant returns to scale? Illustrate why and explain what this means
Problem 2
The current world production of oil is 250 million barrels per day and the current world price of oil is N$726.10 per barrel. The price elasticity of demand (ε) is -0.2 and the elasticity of supply (η) is 0.3. Shiwa Investment is planning to enter the world oil market with a daily production of 11 million barrels of oil per day. For simplicity, assume that the supply and demand curves are linear
Calculate market price and total supply of oil after Shiwa investment has enter the world oil market and explain why the total supply of oil increases with less than 11 million.
Problem 3
a) Given the following demand function for beef (kg),
i) By how much would the price have to fall for consumers to be willing to buy 1 more kg of beef per day?
ii) If the price decreases by N$0.7, by how much will the demand changed?
b) Define marginal utility. Provide an argument why to maximize total utility of good x and good y, the consumer should consume until the ratio of marginal utilities over price is the same across both goods.
c) Consider John who consumes two goods, (X and Y), with prices , and income I =120
d) Construct budget constraint
e) Draw John's budget line with good X on the horizontal axis.
f) Use a graph to show the effect of an increase in income from N$120 to N$150.
g) What will happen to the slope of the budget line if the price of good X decreases to N$18?
Attachment:- Intermediate Microeconomics.rar