elasticity, Microeconomics

Assignment Help:
-1-
ASSIGNMENT #1
The demand function for Product X is given by:
Qdx = 80- 2Px- 0.05P²x -0.2Py + 4Pz + 0.01I+ 2A
Where:
Px
Price of good X
$120.00
Py
Price of related good y
$100.00
Pz
Price of related good z
$40.00
I
Income
$7000.00
A
Advertising
$250.00
a. (i) Calculate the own Price elasticity of demand (PED) for Good X.
(ii) Discuss whether revenue can be increased by increasing the price of Good X?
(iii) Illustrate on a well labelled demand graph for Product X, the Total Revenue earned when Price is equal to $120.00
[8 marks]
b. (i) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Y.
(ii) Using your answer for b. (i), explain the relationship between Good X and Good Y. (Substitute, Complement etc)
(iii) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Z.
(iv) Using your answer for b. (iii), explain the relationship between Good X and Good Z. (Substitute, Complement etc)
(v) Based on the solutions for parts b. (i) to (iv) above, suggest one example of an actual agricultural product that fits the description for each of the following: Product X, Product Y and Product Z.
[13 marks]
c. Consider the following two situations:
? Situation 1: There is a fifteen percent (15%) increase in the price of Good Z (Pz).
? Situation 2: There is a sixty percent (60%) decrease in the price of Good Y (Py).
-2-
Both situations highlighted above, will affect the Total Revenue earned by Producers of Good X. Explain which situation is more beneficial, to the producers of Good X, from a Total Revenue earned perspective.
[5 marks]
d. (i) Calculate the Income elasticity of demand (YED) for Good X.
(ii) Explain whether Good X is a normal good or an inferior good.
[4 marks]
e. Assume that the own Price elasticity of demand (PED) for Good X is -2 and the Income elasticity of Demand (YED) for Good X is 3.
(i) Calculate the percentage change in consumption that will occur, when income declines by twenty percent (20%) .
(ii) Using the demand function presented for Good X above, determine the new quantity of Good X demanded when income declines by twenty percent (20%) , and the Income Elasticity of Demand (YED) for Good X is 3.
[5 marks]
f. Suppose that the Cross-price elasticity of demand (XED) between Good X and Good Z is 4.
(i) How much would the price of Good Z (Pz) have to change in order to increase the consumption of Good X by twenty five percent (25%)?
(ii) Use a well-labelled illustration of the demand curve for Good X to show the effect on the demand for Good X, of the change in the Price of Good Z (PZ) as calculated in f. (i) above.

Related Discussions:- elasticity

Division of labor, Division of Labor The occupation or breaking down o...

Division of Labor The occupation or breaking down of jobs into simple and repetitive responsibilities.

Need Homework help, If I submit an economics problem(Home work), How soon i...

If I submit an economics problem(Home work), How soon it will be answered?

Political economy, Consider the model of corruption explored by Shleifer an...

Consider the model of corruption explored by Shleifer and Vishni’s where there is one government-produced good X. There is a demand for that good described by the inverse demand eq

Discuss about modern economic growth, Discuss about Modern economic growth ...

Discuss about Modern economic growth Modern economic growth is also a shift in the kinds of things we do at work and play and in the way we live. Back in immediate aftermath of

Dialectic inquiry, Dialectic Inquir y It is a technique for gr...

Dialectic Inquir y It is a technique for group decision making in which members are forced to "debate" both sides of a matter. Dialectic inquiry forces consideration o

Describing risk, Describing Risk * To measure risk we should know:  ...

Describing Risk * To measure risk we should know:  1) All the outcomes which are possible.  2) The probability that each outcome will occur. * Interpreting Probability

Define government surplus, Q. Define government surplus? Surplus, Gover...

Q. Define government surplus? Surplus, Government:It's a government surplus exists when a government's tax revenues surpasses its total spending (including both program spendin

Physical chemistry, Calculate the enthalpy change for stepE. that is for th...

Calculate the enthalpy change for stepE. that is for the reaction: Na(s)+ water (arrow) Na(ion)+ OH(ion)+ Hydrogen (g)

What is a statutory demand, The word length should be between 1200 to 1600 ...

The word length should be between 1200 to 1600 words. Please submit a hard copy with a coversheet to the lecturer at the commencement of class in Week 8. Find and read the Judgm

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