equalibrian, Microeconomics

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).
Posted Date: 8/1/2013 9:11:52 AM | Location : Australia







Related Discussions:- equalibrian, Assignment Help, Ask Question on equalibrian, Get Answer, Expert's Help, equalibrian Discussions

Write discussion on equalibrian
Your posts are moderated
Related Questions
How has the haberler''s theory of opportunity cost been an improvement over the classical theory of trade

Give two level of incomes 100$ and 150$ DRAW demand curve for individual a & b and then draw market demand curve for these two different kind of income

Consider two individuals  M and F who must split 20 units of good X and 10 units of good Y. Suppose we can represent M's preference with the utility function Um =X ^2 mYm and Fs

what are the sources of oligopoly power

cars:0,2,4,6,8 tow truck:30,27,21,12,0

1.    Introduction Wood Investments (WI) is a private equity fund that specialises in the leveraged acquisition of publicly-quoted companies with the intention of producing h

Ask qIf the supply and demand curves for labor are represented by the following equations: Wd= -- (1/100)Ld + 30 Ws= (1/200)Ls Ws=Wd Ld=Ld a. Graph the results and show the equili

ADMINISTRATIVE REFORMS - ECONOMIC POLICY: During the last few decades, phenomenal changes are taking place at a fast rate in the field of science and technology as well as in

what is the theory of second best?prove the theorm with the help of diagram?

If one person can produce 1 fish and 10 oranges per hour and works 5 hours a day.another person can produce 2 fish and 20 oranges per 2 hors and works 8 hurs a day then who has the