Project #70580 - Economics

1)    The demand and supply for a particular commodity are given by the following two equations:

DemandP = 20  – 2Qd
and
SupplyP = -5 + 3Qs

where Qd and Qs are quantity demanded and quantity supplied, respectively, and P is price.

Using the equilibrium condition Qs = Qd, determine equilibrium price and equilibrium quantity.

Equilibrium price: $
 _______

Equilibrium quantity: ______ units

 

2)    Suppose that the total revenue received by a company selling basketballs is $840 when the price is set at $60 per basketball and $840 when the price is set at $40 per basketball. Without using the midpoint formula, can you tell whether demand is elastic, inelastic, or unit-elastic over this price range?
 
Demand is ___(elastic, inelastic or unit elastic)__  over this range.

 

3)    What is the formula for measuring the price elasticity of supply? 
 
Es = a)percentage change in quantity demanded / percentage change in income
        b)percentage change in quantity supplied / percentage change in price

                    c)percentage change in quantity demanded/ percentage change in price

 


Suppose the price of apples goes up from $23 to $25 a box.  In direct response, Goldsboro Farms supplies 1500 boxes of apples instead of 1400 boxes. Compute the coefficient of price elasticity (midpoints approach) for Goldsboro’s supply. 
 
Instructions: Round your answer to two decimal places.
 

Es = _______
 
Is its supply elastic, or is it inelastic?
 
Supply is ___(inelastic or elastic)__

 

4)    Given the following income elasticities of demand:
  

Product

Income Elasticity

Movies

+3.4

Dental services

+1.0

Clothing

+0.5

 

The values indicate that
 

 

a) a 10 percent increase in income will increase the demand for clothing by 20 percent.

 

b) movies and dental services are normal goods, but clothing is an inferior good.

 

c) a 5 percent increase in the price of dental services will decrease the demand for dental services by 5 percent.

 

d) a 1 percent increase in income will increase the quantity of movies demanded by 3.4 percent.


 
If the income elasticity coefficient is negative, it means that
 

 

a) the good is inferior so that if income falls, the quantity demanded of the good will rise.

 

b) the good is inferior so that if price falls, the quantity demanded of the good will rise.

 

c) the good is normal so that if price falls, the quantity demanded of the good will rise.

 

d) the good is inferior so that if income falls, the quantity demanded of the good will fall.

 

 

5) Refer to the table below. Fill in the surplus-shortage column.

Instructions: In the table below, fill in the fourth column, Surplus (+) or Shortage (-).  If you are entering any negative numbers, be sure to include a negative sign (-) in front of those numbers.

Thousands of Bushels Demanded

Price per Bushel

Thousands of Bushels Supplied

Surplus (+)
or
Shortage (-)

85

$3.40

72

Answer this___

80

3.70

73

Answer this

75

4.00

75

Answer this

70

4.30

77

Answer this

65

4.60

79

Answer this

60

4.90

81

Answer this


a. What is the equilibrium price in this market? $_______

At what price is there neither a surplus nor a shortage? $_________
 

b.  Calculate the surplus or shortage at a price of $3.40 and at a price of $4.90.

When the price is $3.40, there is a ___________ of ___________ thousand bushels.

When the price is $4.90, there is a ___________ of ____________  thousand bushels.

Instructions:  If you are entering any negative numbers, be sure to include a negative sign (-) in front of those numbers.

How big a surplus or shortage will result if the price is 60 cents higher than the equilibrium price?

_______________  thousand bushels

How big a surplus or shortage will result if the price is 30 cents lower than the equilibrium price?

________________  thousand bushels

 

Subject Mathematics
Due By (Pacific Time) 05/10/2015 11:00 am
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