Microeconomics for Managers Problem Set 2 Sherif Khalifa Question 1 Suppose the supply function for VCRs (good X) is given by Qsx = −100 + 2Px −5Pz Where Pz is the price of a substitute good, DVD players for example. (a) How many VCRs are produced if Px = 100 and Pz = 10? (b) How many VCRs are produced if Px = 100 and Pz = 30? (c) Suppose Pz = 10. Determine the supply function and inverse supply function. (d) Draw the supply curve? 1 Price Quantity (e) What if the price of the good is $100, how much is the producer surplus? Question 2 Suppose the demand for DVD players (good X) is given by 1 1 1 Qdx = 1200− Px + Py −8Pz + M 2 4 10 (a) Are goods Y and Z substitutes or complements of good X? Is good X an inferior or a normal good? Good Y: Good Z: Good X: (b) What is the quantity demanded of good X if research shows that Px = 500, Py = 400, Pz = 10, M = 10, 000? 2 (c) Determine the demand function and the inverse demand function for good X? (d) Draw the demand curve? Price Quantity (e) If the price level is $3440, what is the consumer surplus? Question 3 Assume the quantity demanded of T-shirts is determined as follows Qd = 90 − P and the quantity supplied is determined as follows 3 Qs = 2P − 60 (a) Determine the equilibrium price and quantity? (b) Draw the demand and supply curves. Show the equilibrium price and quantity on the graph? Price Quantity (c) If California state passed a law that the price for a T-shirt should be $35 (what is referred to as a price ceiling). Is there a shortage or a surplus and by how much? (d) If California state passed a law that the price for a T-shirt should be $60 (what is refered to as a price floor). Is there a shortage or a surplus and by how much? 4 Question 4 Start from the equilibrium point in the ice cream market. Draw a graph for every case. (a) What happens to the equilibrium price and equilibrium quantity if weather turns to be very hot? Price S0 P0 D0 Quantity Q0 (b) What happens to the equilibrium price and equilibrium quantity if there is an expansion in the sugar cane fields? Price S0 P0 D0 Quantity Q0 5 (c) What happens to the equilibrium price and equilibrium quantity if both events occurred simultaneously? Price S0 P0 D0 Quantity Q0 6
© Copyright 2024 ExpyDoc
