CHAPTER 20 Supply and Demand: Elasticities and Government-set Prices A. Short-Answer‚ Essays‚ and Problems New 1. The president of a toy company asks you for advice about whether the company should cut the price of its best-selling doll this year based on the following information: last year the company cut the price of its best-selling doll by 10% and the total revenues from doll sales increased by 10%. New 2. The owner of a health club asks you for advice about whether the company
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functions for supply and demand in his market are: Qd = 157 – 35P + 12.5Pw + 0.1Y and Qs = –120 + 75P – 30Pw + 13PL + 12R. Where: Qd = Demand‚ Qs = Supply‚ Pw = Average price of Wides‚ Y = Income in his market‚ PL = Price of labor‚ and R = Is the average humidity level measured in hums. I have assumed the quantities demanded and supplied are a function of price and applied the following conditions: Pw = $6.00‚ Y = $1‚600.00‚ PL = $9.00‚ and R = 25. Demand: Qd = 157 – 35P + 12.5Pw + 0.1Y = 157 – 35P +
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domestic price P0 will fall to the world price Pw. The domestic production will fall to Qs and the domestic consumption will rise to Qd. So imports = Qd-Qs. A is the gain to the producers‚ A+B+C are the loss to the consumers. B+C is the deadweight loss (supply and demand are not at the equilibrium). Now suppose the government eliminates imports by setting a quota of 0. What are the gains and the losses from such a policy ? With no imports the domestic price will rise to P0. Consumers who still
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Elasticity: The real stretch play. We have all heard the phrase‚ “Stretch your dollar”‚ but have you ever stopped to consider what all goes on behind the scenes in order to make this stretch occur? What rules of economics and finance play into making your hard-earned dollar stretch to its maximum value? While the topic of stretching your money spans across all areas of business‚ finance‚ and economics‚ I will focus on the fundamental principle of economic stretch; elasticity. Elasticity in economics
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Demand Estimation After studying this chapter‚ you should be able to: 1. Discuss how the firm’s managers use the information about demand for its product to determine correctly its profit-maximizing rate of output and price‚ or whether to produce a particular product at all. 2. Discuss demand respond to consumer income increase or decrease as a result of an economic expansion or contraction. 3. Specify the components of a regression model that can be used to estimate a demand equation. 4. Interpret
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EG‚S > 0‚ then S and G are directly related. If EG‚S < 0‚ then S and G are inversely related. If EG‚S = 0‚ then S and G are unrelated. Michael R. Baye‚ Managerial Economics and Business Strategy‚ 6e. ©The McGraw-Hill Companies‚ Inc.‚ 2008 The Elasticity Concept Using Calculus • An alternative way to measure the elasticity of a function G = f(S) is EG ‚ S dG S = dS G If EG‚S > 0‚ then S and G are directly related. If EG‚S < 0‚ then S and G are inversely related. If EG‚S = 0‚ then S
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the total economic cost of operating the video store? A. $60‚000 B. $42‚000 C. $30‚000 D. $72‚000 Answer d. 2) In a competitive market‚ the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. A price ceiling of $3 will result in a A. shortage of 30 units. B. shortage of 15 units. C. excess supply of 30 units. D. excess supply of 12 units. Answer: A 3) Which of the following would not shift the demand for IPAD? A. drop in price of IPAD. B. drop in price of
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4x+1 find the following a) (f+g)(x) b) (f-g)(x) c) (f.g)(x) d) (f/g)(x) e) f0g(x) Problem 2: The number N of cars produced at a certain factory in 1 day after t hours of operation is given by N(t) = l00t- 5t2‚ 0≤t≤10. If the cost C (in dollars) of producing N cars is C(N) = 15‚000 + 8‚000N‚ find the cost C as a function of the time t of operation of the factory. Problem 3: Find the inverse of the following functions. a) f(x) = 2x-3 b) f(x) = x3-1
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1. award: 1.50 out of 2.50 points The demand curve for product X is given by QXd = 500 - 5PX. a. Find the inverse demand curve. PX = 100 - 0.2 QXd Instructions: Round your answer to the nearest penny (2 decimal places). b. How much consumer surplus do consumers receive when Px = $45? $91.00 c. How much consumer surplus do consumers receive when Px = $25? $95.00 d. In general‚ what happens to the level of consumer surplus as the price of a good falls? The level of consumer surplus
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CHAPTER 3—DEMAND AND SUPPLY MULTIPLE CHOICE 1. If demand increases while supply decreases for a particular good: a. its equilibrium price will increase while the quantity of the good produced and sold could increase‚ decrease‚ or remain constant. b. the quantity of the good produced and sold will decrease while its equilibrium price could increase‚ decrease‚ or remain constant. c. the quantity of the good produced and sold will increase while its equilibrium price could increase‚ decrease or remain
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