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Demand & Supply

Price Elasticity of Demand: Soft Rock Cafe

A restaurant that goes by the name Soft Rock Cafe is contemplating a T shirt advertising promotion. Monthly sales data from T shirt shops marketing the "Barry Manilow Eats at Soft Rock" design indicate that the demand curve for the T-shirts can be described as: Q = 4,000 - 500P where Q is T shirt sales and P is price. a.

Graphing Out Money Demand at Two Different Levels of Income

Can you please draw this graph for me. The horizontal axis of your graph should be labeled real money balances, and the vertical axis of your graph should be labeled interest rate. The points on demand for money curve when income equals 11,940 are: (2,675, 4.4); (2,750, 4.7); (2,735, 5.0); (2,720, 5.3); (2,705, 5.6); (2,6

Select a company that uses (or has used) dynamic pricing

Select a company that uses (or has used) dynamic pricing. Using the Library, the Internet, and your course materials, briefly explain how the company uses dynamic pricing. Discuss the benefits and drawbacks of dynamic pricing for that particular company. Conclude with a summary of your findings (Perloff, 2007). In your own wor

Economics - Producers' Surplus

Producers' surplus - p = S(q) is the price (dollars per unit) at which q units of a particular commodity will be supplied to the market by producers, and q0 is a specified level of production. Find the price p0 = S(q0) at which q0 units will be supplied and compute the corresponding producers' surplus PS. Sketch the supply c

Labor, cost function

A firm has a cost function given by the following: c(w1, w2, y)= w1w2y^2/(w1+w2) where the wi's are the prices of the factors (inputs) x1 and x2 respectively, and y is output. a) Is this a legitimate cost function? b) Find the firm's production function, y= f(x1, x2). c) From the cost function derive the firm's

Market Power

The Ali Baba Co., is the only supplier of a particular type of Oriental carpet. The estimated demand for its carpets is Q= 112,000 - 500P + 5M Where Q = number of carpets, P = price of carpets (dollars per unit), and M = consumers' income per capita. The estimate average variable cost function for Ali Baba's carpets is AVC

Foundations of Microeconomics

Microeconomics is considered to be the study of scarce resources. Here, consumers (both individuals and organizations) must make allocation decisions. These three basic trade-offs include which goods/services are to be produced, how to produce them, and who gets them. Briefly explain the three trade-offs within a specific good/s

Economics: Given the demand for and the supply of a commodity that you yourself consume on a regular basis, i.e., I might choose coffee, what price will be the equilibrium price of this commodity?

1. Given the demand for and the supply of a commodity that you yourself consume on a regular basis, i.e., I might choose coffee, what price will be the equilibrium price of this commodity? Explain why this price will tend to prevail in the market and why higher (lower) prices, if the do exist temporarily, will tend to fal

The three step approach to changes equilibrium

I really am having problems understanding several microeconomics problems. Please help by explaining step by step how to do the attach problem. With help I can attempt to do other similar problems and understand them as I do them.

Calculating Price, Income and Advertising Elasticity

A firm has estimated the following demand function for its product: Q = 8 - 2P + 0.10I + A Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume P=$10, I=100, and A=20. Based on this information, calculate

Consumer Surplus, Producer Surplus and Deadweight Loss

The market demand curve for a product is given as: Q = 250 - 0.5P a) Firm X1- Assume that the market is supplied by a monopolist with a constant unit cost equal to $100. Calculate the equilibrium price and quantity b) Firm X2- Now assume that the market is supplied by perfectly competitive firms and that the market supply

Supply and Demand -1.The demand for erasers (Q) is given

1.The demand for erasers (Q) is given as follows: Q = 240 - 4Pe + 2M + 1Pb + 1A , where Pe is the price of erasers, M is the level of income, Pb is the price of another (related) good, A is the level of advertising. Suppose that Pe = 10, Pb = 10, A = 10, and M = 20. a. What is the price elasticity of demand of erasers?

Question about Economics - Macroeconomics

A local retailer has decided to carry a well-known brand of shampoo and is considering the way he prices the product. Currently, it is being sold at $6.00 per bottle. Also the marketing department tells him that the quarterly demand by an average man is: Qd = 3 - 0.25P and the quarterly demand by an ave

Perfect Competition

Is the agricultural industry perfectly competitive? Use economic rationale to explain why or why not?

Calculating Arc and Point Elasticities of Demand

Suppose the demand for baseballs is given by: Qd = 360 - 6P where Qd is the quantity demanded of baseballs and P is the price of baseballs. a) What is the Price Elasticity of Demand for baseballs between the prices of $5 and $6 (please give your answer in the form of a fraction )? Please show how to get the fraction from t

Opportunity Costs and Perfect competition

Problems: 1. Explain how opportunity cost is related to the producer's supply curve. 2. Explain why the minimum price necessary rises as the producer produces more output. 3. Define profit. 4. What are the assumptions of a perfectly competitive market. 5. Describe the demand curve faced by the individual firm. D

Implication of demand of law

Your are the chief economic advisor to the King of Terra. The king has observed that while the price of energy has increased 20 percent over the past five years, consumers have actually increased their energy consumption by 10 percent over the same period. It has been suggested to the King by a rival advisor that this proves th

Economics - Econometrics

Suppose we have estimated the slope of a supply curve and wish to test whether the supply is flat, that is. whether its slope is 0. What is the null hypothesis? Should we use a one tailed test? What is the alternative hypothesis?

Finding Equilibrium Price and Quantity for monopolist

The market demand function for a product sold by a monopolist is given below: QD = 120 - 4P The monopolist's marginal cost function is given below: MC = 1.5Q a) Find MR. b) Where do demand and MR intersect the quantity axis? c) Calculate the equilibrium price and quantity.

Studying behavior of substitutes

Suppose gasoline and hybrid vehicles are substitutes. On the back, draw a graph indicating what will happen in the market for hybrid vehicles if the price of gasoline increases. Be sure to label your graph carefully, putting Price on the vertical axis and Quantity on the horizontal axis. You do not need to have actual numbers

Calculating Equilibrium Prices and Quantity

Suppose the demand for guitars in State College is given by Qd = 9000 - 12P where Qd is the quantity demanded, and P is the price of guitars. Also, suppose the supply of guitars is given by Qs = 9P - 3852, where Qs is the quantity supplied of guitars. a)Calculate the equilibrium price of guitars and the equilibrium quantity

The equilibrium quantity

The market for milk is in equilibrium. Recent health reports indicate that calcium is asorbed better in natural forms as milk, and at the same time, the cost of milking equipment rises. Analyze the probable effects on the market.

Maximizing profits

The local space museum has hired you to assist them in setting admission prices. The museum's managers recognize that there are two distinct demand curves for admission. One demand curve applies to people ages 12 to 64, whereas the other is for children and senior citizens. The two demand curves are: PA = 9.6 - 0.08QA PCS

Elasticities & Knowing the nature of related good

The demand function for Good X is defined as Qx = 75 - 2Px - 1.5Py, where Py is the price of Good Y. Calculate the price elasticity of demand using the point formula for Px = 20 and Py = 10. Determine whether demand is elastic, inelastic, or unit elastic with respect to its own price and whether Good Y is a substitute or a compl

Elasticity of demand: Example problem

Discuss a good or service with an elastic demand. How would you behave if the good or service's price increased significantly? Discuss a good or service with an inelastic demand. What would you do if this good or service became much more expensive that it is now? If your income increased substantially, what goods or services

Supply and Demand/Equilibrium Quantity and Price

I have read the material for Chapter 3: "Supply and Demand" located in Michael Parkin's book titled, "Economics" (8th ed.). From my readings, I understand that as the prices rises supply increases. I also understand that as demand increases supply increases. However, I have trouble understanding the concepts concerning equilibri