Homework Economic - Topic 2.3

8/13/2019 Homework Economic - Topic 2.3

1/13

Topic two: Demand, supply and elasticity

1. QD= 200 5P

Qs= -25 + 4P

(a) Sketch QD & QS?

(i)

(ii) Ceteris paribs !ea"s "#thi"$ a%%ects t# a"tit' #% e!a" e*cept the price#% pr#ct hae i"erse re,ati#" t#.

(iii) + Pe = ?

QD= QS

200 - 5Pe= -25 + 4Pe

Pe= 225 = 25 (/)

Qe= Q = Qs = 200 525 = 5 ("it)

+ #ta, prchaser3s e*pe"itre (P) = Pe Qe

P = 25 5 = 15

(b) Qs= - + 4P


2/13

(i) Pe= ?

QD= QS

200 5Pe= - + 4Pe

Pe= 20 = 26 (/)

Qe = QD= QS= - + 426 = 5 ("it)

(ii)

PC = Pe Qe = 265 = 155

C#"s!pti#" is raise

QD= 200 5P

2. QD= 700 .5P

Qs= -100 + 10P

(a) Sketch QD & QS?


3/13

P Qd Qs

0 600 -100

40 100 3900

To resize ch To resize chart data range, drag lower right corner of range.

(b) + Pe = ?

QD= QS

700 .5P = -100 + 10P

Pe= 001.5 = 40 (/)

Qe= Q = Qs = 700 .540 = 600 = 600000 (k$s)

(c) 8% the price #% sbstitte $## %#r 9 :ere t# i"crease the a"tit' e!a"e #%sbstitte $## :#, be ecrease s# that c#st!er :#, cha"$e t# se pr#ct 9.

Qa"tit' #% pr#cts 9 i"crease :hi,e the price :ere "# cha"$e that !ea" :e hae ashi%t #% e!a".

;" the spp,' cre is "# cha"$e becase this is the cha"$e #% "#"-priceeter!i"a"t #% spp,'


4/13

;s the res,t the cha"$e ei,ibri! price a"tit' is i"crease.

() he price #% ,ab#r se t# pr#ce #% $## 9 i"crease the c#st #% $## 9 :#,i"crease a,s# a"tit' spp,ie :i,, be ecrease at each price a" the cre :i,, shi%tas be,#:.


5/13

;s the res,t the cha"$e ei,ibri! price is i"crease bt ei,ibri! a"tit' isecrease.

6. QD= 15 1.5P

Qs= 0 + 1.0P

(a) Sketch QD& QS

0

2

4

6

10

12

0 2 4 6 10 12 14 16

Price

Quantity

Demand & Supply curves

Qd

Qs

(b) Pe= ?

Qe = ?

QD= QS

15 1.5P = 0 + 1.0P

Pe= 152.5 = 7 (/)

Qe = QD= QS= 7 = 700 (,iters)

(c) C#"s!er srp,s is the e%ere"ce bet:ee" a,e cst#!ers are :i,,i"$ t# pa' a"aa,e the' acta,,' pa'.

8t is ca,c,ate #% the area bet:ee" the e!a" cre a" the ei,ibri! price.

CS = 7(10 7)2 = 12 = 1200 (/)

() Pr#cer srp,s is the a,e pr#cer receie bet:ee" the price the' :a"t t# se,,a" the price the' acta,, se,,.


6/13

8t is ca,c,ate #% the area bet:ee" the spp,' cre a" the ei,ibri! price.

PS = 772 = 1 = 100 (/)

4.

(a)

0

50

100

150

200

250

300

0 5 10 15 20 25 30

Price

Quantity


!

"

Pe= 10 (/)

Qe = 1500 ("it'ear)

(b) = ?

= ((1 20)(200 + 170))((200 170)(1 + 20)) = -640= -0.26

; 1 i"crease i" price reces the a"tit' e!a"e b' 0.26

> 1

he e!a" %#r bic'c,es is i"e,astic

(c) s = ?

s = ((21 17)(200 + 170))((200 170)(21 + 17)) = 1.217217217

; 1 ecrease i" price reces the a"tit' e!a"e b' 1.217217217

5. *p,ai" precise,' :h' it is "#t p#ssib,e t# esti!ate the !a$"ite #% a" #:" pricee,asticit' #% e!a" si!p,' b' ,##ki"$ at the s,#pe #% the e!a" cre. @i sa# khA"$thB c ,E"$ FEc FG c# $iH" chI bJ"$ cKch "hL" M# FG Nc cOa F"$ cR

7. P0= 4 Q0 = 100


7/13

P1= 5 Q1 = 1250

(a) = ?

= ((Q1 Q0)(P1+ P0))(( P1- P0)( Q1+ Q0)) = ((1250 100)(5 + 4))((5 -4)( 100 + 1250)) = -1.722502

; 1 i"crease i" price reces the a"tit' e!a"e b' 1.722502 1

he e!a" %#r DTDs hire is e,astic

(b) 1

UQ U P

V = PQ

UV = UP + UQ

Wecase UQ U P :he" P i"crease = Q ecrease a ,#t = V %a,,s

Xe"ce st#re3s ree"e %a,,s

. YDe!a" cres are a,:a's "e$atie,' s,#pe.Z Discss.

.

(a) Ci$arettes

he e!a" cre #% ci$arettes is ertica, ,i"e that !ea"s t#ta, a"tit' e!a" is "#cha"$e i% the price is cha"$e.


8/13

De!a" is per%ect,' i"e,astic (= 0)

he %act#rs eter!i"i"$ the ci$arettes33 price e,asticit' is t'. he e%%ects #% i"irectta*es #" a pr#cers c#sts a" the i!p#rta"ce #% price e,asticit' #% e!a" i"eter!i"i"$ the e%%ects #% a ta* #" !arket price a" a"tit'

(b) ; :e,,-k"#:" bra" #% s#ap

his is pr#ct %#r ai,' "ecessities "# !atter h#: !ch s#ap c#sts pe#p,e :i,, b'it becase pers#"a, h'$ie"e is i!p#rta"t a" %#r :hich there are %e: a,ter"aties

he %act#r the pr#ct3s price is a"tit' #% pr#ct is i"crease that !ea" there arespp,e!e"t #" pr#ct. 8t is cr#ss e,asticit' #% e!a".

. *p,ai" the ,ike,' cr#ss e,asticit' #% e!a" bet:ee" the %#,,#:i"$ pr#cts[ (a) ricea" "##,es(b) e,ectricit' a" e,ectric st#es(c) paper ba$s a,!i"i! %#i, p,astic :rap

10. W##k:#r! a" as'rea are b#th pb,ishers #% p#p,ar "#e,s. (a)

;ss!e that e!a" %#r W##k:#r! "#e,s is e , a s ti c .

(i) *p,ai" the !ea"i"$ #% the "er,i"e ter!.(ii)


9/13

(c) ;" i"crease i" aera$e :eek,' ear"i"$s %r#! /20 t# /610 caseW##k:#r!3s sa,es t# i"crease %r#! 120000 t# 160000 "#e,s. Ca,c,atea" i"terpret the i"c#!e e,asticit'.

(c) ]he" the aera$e price #% :#!e"3s !a$a\i"es i"crease b' 7 the e!a" %#r"#e,s i"crease b' 2 per !#"th. D# these %i$res s$$est that "#e,s a":#!e"3s !a$a\i"es be,#"$ t# the sa!e !arket? *p,ai".

Topic Three: Applications of Demand and Supply

1. Spp#se the e!a" a" spp,' cres %#r $## ^ are as %#,,#:s[

QD = 10 - 2PQS = -10 + 2P :here P is price per k$ !easre i" #,,ars a" Q is a"tit' !easre i" _000k$s

(a) Sketch the e!a" a" spp,' cres.

P Qd Qs

0 #0 -1035 0 60

To resize ch To resize chart data range, drag lower right corner of range.

b. Deter!i"e the ei,ibri! price a" a"tit'.

Q = Qs = 0 2Pe = -10 + 2Pe

Pe = 20 = Qe = 60

c. Ca,c,ate the a,e #% the c#"s!er a" pr#cer srp,s at the ei,ibri! price.

Pe = 20

Q = 0 = P = 65

Qs = 0 = P = 5


10/13

CS1 = (65 20) * 60R2 = 225

PS1 = (20 5) * 60R2 = 225

.

e. Pc = 15 = Qs = Q0= 20

CS2 = `(65 15)+(25 15)R * 202 = 600

PS2 = (15 5) * 20R2 = 100

%. C#"s!er.

2. Spp#se the e!a" a" spp,' cres %#r $## ] are as %#,,#:s[ QD =

100 - 2PQS = -20 + 4P :here P is price per k$ !easre i" #,,ars

a" Q is a"tit' !easre i" _00k$s

25

20

15

20 30

35

5


11/13

(a) Sketch the e!a" a" spp,' cres.

0

10

20

30

40

50

60

0 50 100 150 200

Price

Quantity


Qd

Qs

(b) Deter!i"e the ei,ibri! price a" a"tit'.Q = Qs = 100 2P = -20 + 4P = Pe = 20 Qe = 70

c.

Pe = 20

Q = 0 = P = 50

Qs = 0 = P = 5

CS1 = (50-20)* 70R2 = 00

PS1 = (20 5)* 70R2 = 450

.

e.


12/13

P% = 60 = Q = Q0= 40

CS2 = (50 60)*40R2 = 400

PS2 = (60 15 + 60 5) * 40R2 = 00

%. Pr#cer

6. ]ith the i"tr#cti#" #% a "it ta* t# be pai b' pr#cers the spp,' cre shi%tsp:ars. *p,ai" :h' :he" the sa!e ta* is ,eie irect,' #" c#"s!ers thee!a" cre shi%ts #:":ars.

he i"crease i" the a!#"t #% ta* #" the b'ers :i,, a%%ect the e!a" cre $reat,' :hi,e thespp,' cre %#r the spp,' #% this c#!!#it' :i,, re!ai" the sa!e. C#"s!ers prchasi"$p#:er has bee" rece b' ta*i"$ their i"c#!e he"ce the' :i,, prchase ,ess %r#! the !arket.C#"s!ers :i,, a,s# prchase ,ess i" the !arket :he" the prices #% the c#!!#ities $# p e t#

i"crease i" the a!#"t #% a,e ae ta* ,eie #" the $##s a" serices. he e!a" cre:i,, there%#re shi%t #:":ars :ith a" i"crease i" the a!#"t #% ta*. he recti#" i" thea!#"t #% ta*ati#" :i,, a,s# a%%ect the e!a" cre b' shi%ti"$ the e!a" cre p:ars. hisis becase c#"s!ers i"c#!e is i"crease b' recti#" i" c#"s!er3s i"c#!e #r the prices #%c#!!#ities are rece b' recti#" i" the a!#"t #% a,e ae ta* i"creasi"$ a"titiese!a"e.4. Spp#se the $#er"!e"t is c#"sieri"$ the i!p#siti#" #% a "it ta* t# be ,eie #" beer

50

30

20

15

40 60

5


13/13

pr#cers. he ie: #% c#!pa"ies is that this is st #"e !#re c#st %#r the! t# bear.C#"s!ers isa$ree sa'i"$ that the c#!pa"ies pass the ta*es #" t# the! i" ter!s #%hi$her prices.

(a) ie" that the e!a" %#r beer is i"e,astic :hich ie:p#i"t is c#rrect? (b)

]#, the bre" #% the ta* be a"' i%%ere"t i% the $#er"!e"t ,eie theta* #" c#"s!ers (#er the c#"ter) rather tha" #" beer pr#cers?

*p,ai" '#r a"s:ers %,,' a" se ia$ra!s i" '#r a"a,'sis.

Documents

Homework Economic - Topic 2.3