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A firm has estimated the following demand function for its product:Q = 100 - 5 P + 5 I + 15 A
Where Q is quantity demanded per month in thousands, P is product price, I is an index of consumer income, and A is advertising expenditures per month in thousands. Assume that P = $200, I = 150, and A = 30. For simplicity in calculating the results, use the point elasticity formulas to complete the calculations indicated below.
(i) Calculate quantity demanded.(ii) Calculate the price elasticity for demand. Is demand elastic, inelastic, or unit elastic?(iii) Calculate the income elasticity of demand. Is the good normal or inferior?(iv) Calculate the advertising elasticity of demand.
In 1951, Coke used to cost $0.37 for a pack of 6, an average house was worth about $16000, and a car was $1400 to 2200. All these goods are much more expensive now, and yet we buy and consume more of these things today than we did in 1951. Does th..
claimed that if z+x/y, then g(z) = g(x)-g(y), where g(.) represent the growth rate of the variable in question. Prove this result in a formal way using two methods. First, repeat the method that we used in class to prove that if z = xy, then g(z)=g..
The construction of a dam will cost $1,000 at time 0, $500 in year 1, $500 in year 2. It will be completed at the end of year 2. Beginning in year 3, maintenance costs will be $100 per year through year 10. From years 11 on, maintenance costs will..
The second largest public utility in the nation is the sole provider of electricity in 32 counties of southern Florida. To meet the monthly demand for electricity in these counties, which is given by the inverse demand function P = 1000 - 5Q.
Recall that the Lerner formula or condition states that (p-MC)/p = 1/E. Write down the profit maximization conditions for pj j=X,Y. Can you write down the Lerner conditions for the two products? Why is the formula different in this case from the u..
Suppose you are a manager of a firm that produces products X, Y and Z. You know that there are two different types of consumers, type 1 and type 2, who value your products differently. You also know that there 10,000 type1 consumers and 50,000 typ..
I have a time series set of data of workers in motor vehicle industry from 1972-2001 as well as average weekly hours of workers in motor vehicle industry
A company is considering buying a new bottle-capping machine. The initial cost of the machine is $325,000 and it has a 10-year life. Monthly maintenance costs are expected to be $1200 per month for the first 7 years and $2000 per month for the rem..
Gene Milton borrowed a sum of $5,000 from his uncle Ben and after three years paid a sum of $5,000 and paid another $1,000 after 4 years to pay off the loan. Determine the interest rate Gene paid it the payments were based on yearly compounding.
suppose the hourly wage is $2 and the price of each unit of capital is $8. The production function is given by q = (E^1/2)(K^1/2) and the marginal product of labor and capital are MPe =(K^1/2)/(2E^1/2) and MPk =(E^1/2)/(2K^1/2) respectively.
Draw a supply and demand diagram 2. In equilibrium, how many packs of cigarettes are purchased? What is the equilibrium price? What is consumer surplus and producer surplus in equilibrium? 3. Suppose that a flat tax of $1.50 per unit is imposed on ..
Now, suppose workers come from two distinguishable groups, A and B, and there are no systematic productivity differences between the two groups. However, firms believe that ¾ of A workers are type H and only ¼ of B workers are type H.
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