Determine the demand functions, Econometrics

The town of Dusty View, Saskatchewan has only two residents - Justin and Sarah - and has a water supply shortage in the summer. The municipal water utility charges a break even price of $100 per unit of water but the system capacity is limited to 500 units. Justin and Sarah's marginal utility functions for water in the summer are as follows:

            MU(Justin) = 1600 - 4W

            MU(Sarah) = 1200 - 4W

a)  Determine the demand functions for Justin and Sarah and the total demand for water in Dusty View. Show that there will be a summer water shortage.

b)  Suppose the town decides to increase the price of water until there is no excess demand. Calculate the new price and the gains from trade (individual consumer surpluses and town profit) resulting from this decision.

c)  Now suppose the town decides against using price to ration water and instead allocates the water fairly between Sarah and Justin - 250 units each - and reverts to charging $100 per unit. Assume resale between Sarah and Justin is impossible. Calculate the gains from trade in this case. Why is it better/worse than the solution in b)?

d) Now suppose resale is possible under the 250 unit per person allocation plan. What will be the final result? How does it compare with the result in b)? 

 

Posted Date: 2/27/2013 7:45:12 AM | Location : United States







Related Discussions:- Determine the demand functions, Assignment Help, Ask Question on Determine the demand functions, Get Answer, Expert's Help, Determine the demand functions Discussions

Write discussion on Determine the demand functions
Your posts are moderated
Related Questions
demand analysis of fast food among civil servant

My question is that when we use Impulse response function and how to use it. Is it used along with some other methodology. What is the meaning of graphs of IRF?

How will government regulation impact decision making

Assume the following table gives the joint PDF (probability distribution function, not Adobe document!!) of two discrete variables, x and Y.                                  Vari

A thick walled cylinder has internal and external diameters of 120 mm and 420 mm respectively. It is made from a ductile elastic material of your choice and is used to contain hot

suppose only one professor teaches economics at your university, would you say that this prof is a monopolist who can exact any price from students in the form of readings assigned

examples of economic relationships


The following table contains the ACT scores and the GPA (grade point average) for eight college students. Grade point average is based on a four-point scale and has been rounded to

Help with how to calculate a value from the dickey fuller test