# Equilibrium Price - Managerial Economics

Not what you're looking for?

Need help understanding (need to see) how these problems are worked.

(See attached file for full problem description with equations and data table)

---

s

1. Suppose the supply function for product X is given by Q x = -50 + 0.5 Px - 5Pz.

a. How much of product X is produced when Px = $500 and Pz = $30?

b. How much of product X is produced when Px = $50 and Pz = $30?

c. Suppose Pz = $30. Determine the supply function and inverse supply function for good X. Graph the inverse supply function.

2. The demand for good X is given by

d

Q x = 1,200 - ½ Px + 1/4Py - 8 Pz + 1/10 M

Research shows that the prices of related goods are given by Py = $5,900 and

Pz = $90, while the average income of individuals consuming this product is M = $55,000.

b. Indicate whether goods Y and Z are substitutes or complements for good X.

c. Is X inferior or a normal good?

d. How many units of good X will be purchased when Px = $4,910?

e. Determine the demand function and inverse demand function for good X. Graph the demand curve for good X.

3. Suppose demand and supply are given by

D s

Q x = 7 - ½ Px and Q x = ¼ Px - ½

a. Determine the equilibrium price and quantity. Show the equilibrium graphically.

b. Suppose a $6 excise tax is imposed on the good. Determine the new equilibrium price and quantity.

c. How much tax revenue does the government earn with the $6 tax?

4. Suppose the demand function for a firm's product is given by

d

In Q x = 3- 0.5 In Px - 2.5 In Py + In M + 2 In A

Where

Px = $10,

Py = $4,

M = $20,000, and

A = $250.

a. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unitary elastic.

b. Determine the cross-price elasticity of demand between good X and good Y, and state whether these two goods are substitutes or complements.

c. Determine the income elasticity of demand, and state whether good X is a normal or inferior good.

d. Determine the own advertising elasticity of demand.

5. Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross -price elasticity of demand between it and good Y is -6. Determine how much the consumption of this good will change if:

a. The price of good X increases by 5 percent.

b. The price of good Y increases by 10 percent.

c. Advertising decreases by 2 percent.

d. Income falls by 3 percent.

6. You are the manager of a firm that sells a leading brand of alkaline batteries. The data for the product is attached. Specifically, the file contains data on the natural logarithm of your quantity sold, price, and the average income of consumers in various regions around the world. Use this information to perform a log-linear regression, and then determine the likely impact of a 3 percent decline in global income on the overall demand for your product.

---

##### Purchase this Solution

##### Solution Summary

Determine the equilibrium price and quantity. Show the equilibrium graphically.

##### Purchase this Solution

##### Free BrainMass Quizzes

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.