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

Using R to generate results, I have a few econometric that require the use ...

I have a few econometric that require the use of R to generate the answer

GDP, If in some country personal consumption expenditures in a specific yea...

If in some country personal consumption expenditures in a specific year are $50 billion, purchases of stocks and bonds are $30 billion, net exports are -$10 billion, government pur

Labor economics, Ask question #Minimum unions tie the hand of management an...

Ask question #Minimum unions tie the hand of management and inhibit efficient decision making100 words accepted#

Econometric model, Provide a clear statement of the research topic and the ...

Provide a clear statement of the research topic and the underlying relationship that you are modeling. Identify the dependent variable and the independent variables (minimum of 3 i

Primal and dual lp problems, As in the model solved initially, the followin...

As in the model solved initially, the following is the LP model Maximize Z = $42.13*(x 11 + x 12 + x 13 + x 14 ) + $38.47*(x 21 + x 22 + x 23 + x 24 ) + $27.87*(x 31 + x

Discuss the criteria of the evaluation framework, Question 1: Explain t...

Question 1: Explain the main drivers of globalisation and ascertain whether they have helped to reduce the gap between the rich and the poor countries. Question 2: Disc

Estimate the electrons speed, An electron follows a helical path in a unifo...

An electron follows a helical path in a uniform magnetic field of magnitude 0.422T. The pitch of the path is 6.81 mm, and the magnitude force on the electron is 1.59 x 10 -15 N. W

Identify the parameters of this model, Consider a Simple Linear Regression ...

Consider a Simple Linear Regression Model (SLRM) of the form y= a1+a2X+e where e ~  N(0,σ 2 )(Use the assumptions outlined in our class and available for review in the lecture note

Monopoly, suppose only one professor teaches economics at your university, ...

suppose only one professor teaches economics at your university, would you say that this prof is a monopolist who can exact any price from students in the form of readings assigned

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