equalibrian, Microeconomics

Assignment Help:
Imagine a country where plane and train services between two main cities are both provided by private companies, and, from a consumer perspective these services are viewed as substitutes.
The demand for plane trips is:
(1)
Where D1 is annual demand for plane trips, P1 is price of plane trips, P2 is price of train trips and Y is average annual income.
Assume the supply of plane trips by the aviation industry can be described by:
(2)
Where S1 is plane trips per year and the market clears so:
(3)
Assume average annual income, Y, is $75,000 and the price of train trips is P2 = $500. Further, assume the market always clears, there are no empty planes or theft of rides and producers are competitive. Ignore externalities such as anti-social behaviour and pollution.
Answer the following questions:

1. What is the equilibrium price of plane trips?
2. How many plane trips are provided and purchased?
3. Calculate the producer surplus for the plane trips providers (airways companies).

Related Discussions:- equalibrian

Explain production and describe production function, The act of production ...

The act of production involves the transformation of inputs into output. Production is a transformation of physical inputs into physical inputs into physical output. The output is

Firms in a competitive markets, illustrate a long-run equilbrium using diag...

illustrate a long-run equilbrium using diagrams for the gold market and for a representative gold mine

Market failure, causes of market failure and its solutions?

causes of market failure and its solutions?

Oligopoly, large firms charge the price which is higher than the small firm...

large firms charge the price which is higher than the small firms, contruct the diagram

Competitiveness in your industry, a) Collect costs, revenue data, or other ...

a) Collect costs, revenue data, or other data from the industry that you deem relevant. Describe how you would modify the data in order to make it relevant to decisions a manager m

National income, National income: The national income or product ...

National income: The national income or product or expenditure provides a measure of total value at factor cost of final goods and services, which are available either fo

Determinant of price elasticity of supply, Assume there is a remote area in...

Assume there is a remote area in china with high population.The area is composed exclusively of apartments and is populated by low-income residents .The people tend to stay in that

Macroeconomics, Consider the following: The city council has just approved ...

Consider the following: The city council has just approved the construction of a water park in your town. You are responsible for studying the impact of the new water park on the l

Economies of scope, Economies of Scope The ability of a organizati...

Economies of Scope The ability of a organization to decrease its unit costs by producing two or more products or services that involve complementary skills, experience and

Setting up a model to forecast future demand, Because of your reputation as...

Because of your reputation as an expert in economic analysis, you have been hired as vice president of a business consulting firm named Economists R Us.  This firm provides consult

Write Your Message!

Captcha
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!

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