Determine the demand functions, Econometrics

Assignment Help:

The town of Dusty View, Saskatchewan has only two residents - Justin and Sarah - and has a water supply shortage in the summer. The municipal water utility charges a break even price of $100 per unit of water but the system capacity is limited to 500 units. Justin and Sarah's marginal utility functions for water in the summer are as follows:

            MU(Justin) = 1600 - 4W

            MU(Sarah) = 1200 - 4W

a)  Determine the demand functions for Justin and Sarah and the total demand for water in Dusty View. Show that there will be a summer water shortage.

b)  Suppose the town decides to increase the price of water until there is no excess demand. Calculate the new price and the gains from trade (individual consumer surpluses and town profit) resulting from this decision.

c)  Now suppose the town decides against using price to ration water and instead allocates the water fairly between Sarah and Justin - 250 units each - and reverts to charging $100 per unit. Assume resale between Sarah and Justin is impossible. Calculate the gains from trade in this case. Why is it better/worse than the solution in b)?

d) Now suppose resale is possible under the 250 unit per person allocation plan. What will be the final result? How does it compare with the result in b)? 

 


Related Discussions:- Determine the demand functions

Firm''s profit function, A  firm manufactures  and  sells  a  product  that...

A  firm manufactures  and  sells  a  product  that  has  the  following  demand function:       Q = 180 - 4P   where P  is price, Q  is quantity.  It also  faces  the  following

Macro econometrics.., (b) Suppose that the initial conditions are as follow...

(b) Suppose that the initial conditions are as follows: y0 = 0 and et = 0 for t= 0. Impose the initial conditions in order to find the general solution.

Regression, Consider a linear model to explain pricing of houses: Price = ß...

Consider a linear model to explain pricing of houses: Price = ß0 + ß1lotsize + ß2sqrft + ß3bdrms + u (1) E(u| lotsize, sqrft, bdrms)=0 Var (u| lotsize, sqrft, bdrms)=s2 lotsize4

Replication of the work of a published paper, Hi I am currently working on ...

Hi I am currently working on my econometrics coursework which is to replicate a published paper. I was given the same data set as the paper and suppose to get the same answer as th

Stationary point, Determine the  four  stationary  points  of  the  functi...

Determine the  four  stationary  points  of  the  function  Z= 2x 3 +y 3 -18x -12y +50 according to whether they define a maximum, minimum, or saddle point.

Transportation problems, Process of least cost method and how to do a minim...

Process of least cost method and how to do a minimisation problem

Project, QM2 Econometric Project As part of the course requirements you hav...

QM2 Econometric Project As part of the course requirements you have to undertake an econometric evaluation of an economic issue using data that you have gathered either from the ho

Nonlinear Adjustment for the Integration between Internation, Hi, I''m a Ph...

Hi, I''m a PhD student in empirical finance I’m trying to conduct bivariate nonlinear conintegration tests using threshold Vector Error Correction (TVEC) methodology (Hansen and Se

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd