User Account

All Pages

Elasticity, Microeconomics

Assignment Help:
-1-
ASSIGNMENT #1
The demand function for Product X is given by:
Qdx = 80- 2Px- 0.05P²x -0.2Py + 4Pz + 0.01I+ 2A
Where:
Px
Price of good X
$120.00
Py
Price of related good y
$100.00
Pz
Price of related good z
$40.00
I
Income
$7000.00
A
Advertising
$250.00
a. (i) Calculate the own Price elasticity of demand (PED) for Good X.
(ii) Discuss whether revenue can be increased by increasing the price of Good X?
(iii) Illustrate on a well labelled demand graph for Product X, the Total Revenue earned when Price is equal to $120.00
[8 marks]
b. (i) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Y.
(ii) Using your answer for b. (i), explain the relationship between Good X and Good Y. (Substitute, Complement etc)
(iii) Determine the Cross-Price elasticity of demand (XED) between Good X and Good Z.
(iv) Using your answer for b. (iii), explain the relationship between Good X and Good Z. (Substitute, Complement etc)
(v) Based on the solutions for parts b. (i) to (iv) above, suggest one example of an actual agricultural product that fits the description for each of the following: Product X, Product Y and Product Z.
[13 marks]
c. Consider the following two situations:
? Situation 1: There is a fifteen percent (15%) increase in the price of Good Z (Pz).
? Situation 2: There is a sixty percent (60%) decrease in the price of Good Y (Py).
-2-
Both situations highlighted above, will affect the Total Revenue earned by Producers of Good X. Explain which situation is more beneficial, to the producers of Good X, from a Total Revenue earned perspective.
[5 marks]
d. (i) Calculate the Income elasticity of demand (YED) for Good X.
(ii) Explain whether Good X is a normal good or an inferior good.
[4 marks]
e. Assume that the own Price elasticity of demand (PED) for Good X is -2 and the Income elasticity of Demand (YED) for Good X is 3.
(i) Calculate the percentage change in consumption that will occur, when income declines by twenty percent (20%) .
(ii) Using the demand function presented for Good X above, determine the new quantity of Good X demanded when income declines by twenty percent (20%) , and the Income Elasticity of Demand (YED) for Good X is 3.
[5 marks]
f. Suppose that the Cross-price elasticity of demand (XED) between Good X and Good Z is 4.
(i) How much would the price of Good Z (Pz) have to change in order to increase the consumption of Good X by twenty five percent (25%)?

Related Discussions:- Elasticity

Vectors, given that a=(4;2) and b=(5;11)determine the value of x in the fol...

given that a=(4;2) and b=(5;11)determine the value of x in the following equation b=3x-1/2a

Theory of perfect competition, Perfect competition has the following charac...

Perfect competition has the following characteristics: 1. Large number of firms - There are a large number of firms in the market. Due to this each firm produces a very small fr

What is free trade agreements, Q. What is Free Trade Agreements? Free T...

Q. What is Free Trade Agreements? Free Trade Agreements:It is an agreement between two or more countriesthat eliminates tariffs on trade between the countries, reduces non-tari

Silicon properties, What are the chemical properties of silicon?

What are the chemical properties of silicon?

Explain hard currency, International economic relations also vary, in large...

International economic relations also vary, in large measure, on monetary issues.  You are unlikely to accept the Turkish Lire in payment for your wages in this country, easily bec

Nature and scope of economics, explain the nature and scope of economics.

explain the nature and scope of economics.

Indifference curve.., a consumer consumes only two goods x and y is in eqil...

a consumer consumes only two goods x and y is in eqillibrium price of x falls explain the reaction of consumer through utility analysis

Fixed exchange rate system, FIXED EXCHANGE RATE SYSTEM: National curre...

FIXED EXCHANGE RATE SYSTEM: National currencies are generally acceptable within the geographical boundaries of a country. As such, trade between countries typically involves

Gdp, n..

n..

Effects of weight loss, Effects of weight loss A healthy body is required n...

Effects of weight loss A healthy body is required not only for the sake of health, but also for maintaining the standard frame of a body. A person experiencing the problem of weigh

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd