Me Exercise
Chapter 2: DQ7 p.55
PCCW provides broadband Internet access in Hong Kong under the brand name, Netvigator. Table 1 lists several of the plans offered in April 2004. Table 1: Netvigator Broadband Internet Access Plans | Plan | Monthly Subscription | Included Hours | Charge per additional hour | Bandwidth | Basic | HK$198 | 20 | HK$2 | Up to 1.5 Mbps | 3M Single User Plan | HK$298 | 100 | HK$2 | Up to 3.0 Mbps | 6M Single User Plan | HK$398 | 200 | HK$2 | Up to 6.0 Mbps |
a.Wong subscribes to the 6M plan and uses 150 hours a month. Suppose that Wong's demand curve is a straight line such that if the price of access were HK$20 per hour or higher, she would buy nothing. Draw her demand curve, and calculate her buyer surplus.
b.Suppose that Wong switches to the 3M plan. Referring to her demand curve, how many hours would she use each month? Calculate her buyer surplus.
Answer:
(a) Refer to the following diagram for Wong’s demand curve. Her buyer surplus with the 6M plan is ½ x 20 x 150 – 398 = $1,102.
(b) With the 3M plan, she would use 135 hours a month (35 hours in excess of the “included time”). Her buyer surplus would be ½ x [20 + 2] x 135 – 298 -70= $1,117.
Chapter 3: DQ 11 p.99
This question applies techniques introduced in the math supplement to Chapter 2. Suppose that a car rental business faces a demand represented by the equation, D = 30 - p + 0.4Y, where D is the quantity demanded in rentals a month, p is the price in dollars per rental, and Y is the average consumer's income in thousands of dollars a year.
a. Suppose that income, Y = 100, and car rental business raises the price from p = 30 to p = 35. Calculate the own-price elasticity of demand.
b. Suppose that income, Y = 110, and car rental business raises the price from p = 30 to p = 35. Calculate the own-price elasticity of demand.
c. Suppose that the price, p = 30, and that income rises from Y = 100 to Y = 110. Calculate the income
PCCW provides broadband Internet access in Hong Kong under the brand name, Netvigator. Table 1 lists several of the plans offered in April 2004. Table 1: Netvigator Broadband Internet Access Plans | Plan | Monthly Subscription | Included Hours | Charge per additional hour | Bandwidth | Basic | HK$198 | 20 | HK$2 | Up to 1.5 Mbps | 3M Single User Plan | HK$298 | 100 | HK$2 | Up to 3.0 Mbps | 6M Single User Plan | HK$398 | 200 | HK$2 | Up to 6.0 Mbps |
a.Wong subscribes to the 6M plan and uses 150 hours a month. Suppose that Wong's demand curve is a straight line such that if the price of access were HK$20 per hour or higher, she would buy nothing. Draw her demand curve, and calculate her buyer surplus.
b.Suppose that Wong switches to the 3M plan. Referring to her demand curve, how many hours would she use each month? Calculate her buyer surplus.
Answer:
(a) Refer to the following diagram for Wong’s demand curve. Her buyer surplus with the 6M plan is ½ x 20 x 150 – 398 = $1,102.
(b) With the 3M plan, she would use 135 hours a month (35 hours in excess of the “included time”). Her buyer surplus would be ½ x [20 + 2] x 135 – 298 -70= $1,117.
Chapter 3: DQ 11 p.99
This question applies techniques introduced in the math supplement to Chapter 2. Suppose that a car rental business faces a demand represented by the equation, D = 30 - p + 0.4Y, where D is the quantity demanded in rentals a month, p is the price in dollars per rental, and Y is the average consumer's income in thousands of dollars a year.
a. Suppose that income, Y = 100, and car rental business raises the price from p = 30 to p = 35. Calculate the own-price elasticity of demand.
b. Suppose that income, Y = 110, and car rental business raises the price from p = 30 to p = 35. Calculate the own-price elasticity of demand.
c. Suppose that the price, p = 30, and that income rises from Y = 100 to Y = 110. Calculate the income