Project #72875 - Economics 5 Questions

Please answer these questions and show your work. 

 

Thanks!

 

1.       A bond pays $1,000 at the end of each year for 5 years plus an additional $5,000 when the bond matures at the end of 5 years. What is the most you would be willing to pay for this bond if your opportunity cost of capital is 5%?

2.       Suppose the own price elasticity of demand for good X is -3, its income elasticity is 2, and the cross price elasticity of demand between good X and Y is -5. Determine how much the consumption of this good will change if:

a.       The price of good X increases by 5%

b.      The price of good Y increases by 12%

3.       Suppose demand and supply are given by Qd = 100 - P and Qs = 2P + 25.

a.        What are the equilibrium quantity and price in this market?

b.      Determine the quantity demanded, the quantity supplied, and the magnitude of the surplus if a price floor of $ 40 is imposed in this market.

c.       Determine the quantity demanded, the quantity supplied, and the magnitude of the shortage if a price ceiling of $ 15 is imposed in this market. Also, determine the full economic price paid by consumers.

4.       A consumer has $600 to spend on goods X and Y.  The market prices of these two goods are Px = $30 and Py = $10.

a.       What is the market rate of substitution between goods X and Y?

b.      Suppose that the consumer's income doubled.  How does that alter the market rate of substitution between goods X and Y?

5.    Below is data on weekly Quantity demanded of pizza in a small town in South Georgia, prices and average household incomes.
Use the data to perform a linear regression analysis of price and income on quantity demanded.

1.    How well does the regression fit the data?

2.    What is the income elasticity of demand for pizza when the income (M) is $40 (thousand) and the price (P) is $30?

 

Quantity

Price

Income

 

 

1

183

29.25

30.72

 

 

2

207

30.1

37.57

 

 

3

183

30.54

29.43

 

 

4

192

28.67

37.2

 

 

5

182

30.23

35.87

 

 

6

217

29.76

35.16

 

 

7

180

31.77

27.7

 

 

8

195

31.01

32.96

 

 

9

200

29.21

32.3

 

 

10

198

30.79

36.1

 

 

11

195

29.75

32.68

 

 

12

205

29.98

37.49

 

 

13

182

30.06

31.32

 

 

14

218

28.94

38.67

 

 

15

231

29.76

34.82

 

 

16

212

27.94

42.27

 

 

17

222

30.75

40.03

 

 

18

150

28.96

30.02

 

 

19

183

30.96

34.3

 

 

20

158

29.03

29.89

 

 

21

199

30.83

35.27

 

 

22

196

30.6

33.55

 

 

23

234

29.98

40.03

 

 

24

171

29.27

29.91

 

 

25

171

31.42

33.69

 

 

26

170

29.24

31.51

 

 

27

210

27.61

30.6

 

 

28

184

30.64

34.36

 

 

29

223

29.97

37.59

 

 

30

177

31.87

31.78

 

 

31

168

30.06

27.47

 

 

32

192

28.83

40.64

 

 

33

201

30.91

36.2

 

 

34

207

29.84

38.05

 

 

35

241

29.94

39.55

 

 

36

216

30.67

35.38

 

 

37

193

31.03

40.42

 

 

38

187

28.45

37.29

 

 

39

194

30.02

29.68

 

 

40

212

30.85

40.61

 

 

41

141

30.46

28.23

 

 

42

217

28.85

36.87

 

 

43

194

29.34

36.59

 

 

44

182

30.1

29.56

 

 

45

225

28.88

36.26

 

 

46

214

30.2

34.29

 

 

47

198

28.56

41.7

 

 

48

183

29.51

30.92

 

 

49

206

29.86

31.22

 

 

50

198

30.83

32.39

 

 

 

 

 

6.       Provide an intuitive explanation for why a “buy one, get one free” deal is not the same as a “half price” sale.

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