Microeconomics Answers

Your budget constraint for the two goods A and B is 12A + 4B = I, where I is your income. You are currently consuming more than 27 units of B. In order to get 3 more units of A, how many units of B would you have to give up?

After graduating from college, you are hired by the Ford automobile company as an economic analyst. For your first project, you are asked to estimate what would happen to the sales of Ford Mustangs as a result of a change in (i) the price of a Chevrolet Camaro, (ii) the price of gasoline, and (iii) consumer incomes. You are given the following elasticities:

Price elasticity of demand for Ford Mustangs = -2.5

Cross-price elasticity between Ford Mustangs and Camaros = 1.5

Cross-price elasticity between Ford Mustangs and gasoline = -0.80

Income elasticity of demand for Ford Mustangs = 3.00

QUESTIONS:
Part 1
Suppose the price of a Camaro falls by 10%. With all else being equal, sales of Ford Mustangs would (Rise/Fall) by_____%.

Part 2
If the price of gasoline increases by 20%, the quantity of Ford Mustangs would (Rise/Fall) by_____%.

Part 3
If consumer incomes increase by 5%, the quantity of Ford Mustangs would (Rise/Fall) by ____%.

Suppose that price of a pair of shoes rises from $160 to $180. As a result, there are now 5,800 pairs of shoes demanded versus 7,000 as before.
Calculate price elasticity of demand for these shoes. USE MIDPOINT FORMULA.

From the date provided, calculate the Price elasticity (Arc) against all price levels.


Hint: You can price as average price (P1+ P2/2) and quantity as average quantity (Q1+Q2/2).

During the past year, Ironside sold 15 million square yards (units) of carpeting at an average wholesale price of $7.75 per unit. This year, income per capita is expected to surge from $17,250 to $18,750 as the nation recovers from a steep recession. Without any price change, Ironside’s marketing director expects current-year sales to rise to 25 million units.


A. Calculate the implied income arc elasticity of demand. B. Given the projected rise in income, the marketing director believes that the current volume of 15 million units could be maintained despite an increase in price of 50¢ per unit. On this basis, calculate the implied arc price elasticity of demand. C. Holding all else equal, would a further increase in price result in higher or lower total revenue?

The Creative Publishing Company (CPC) is a coupon book publisher with markets in several southeastern states. CPC coupon books are either sold directly to the public, sold through religious and other charitable organizations, or given away as promotional items. Operating experience during the past year suggests the following demand function for CPC’s coupon books:

Q = 5,000 – 4,000P + 0.02Pop + 0.5I + 1.5A

Where: Q is quantity, P is price ($), Pop is population, I is disposable income per household ($), and A is advertising expenditures ($).


A. Determine the demand faced by CPC in a typical market in which P = $10, Pop = 1,000,000 persons, I = $30,000, and A = $10,000. B. Calculate the level of demand if CPC increases annual advertising expenditures from $10,000 to $15,000. C. Calculate the demand curves faced by CPC in parts A and B.

1. As a manager of a restaurant, you estimate the total product of labor used to cook meals, as shown in Table 4.6. Use these data to calculate the marginal product of labor.
A. Plot the total product and marginal product schedules?
B. What effect does the law of diminishing marginal returns have on these schedules?
C. What underlies the law of diminishing marginal returns?

hi! just want to ask why in a perfect competitive labour market, the supply curve of labour to a firm is perfectly elastic? i believe this is similar to the demand curve of a firm in a perfectly competitive market, but if it this is true then shouldn't the demand curve for labour be perfectly elastic not the supply curve? However, I know the whole MPR and diminishing returns things that make the demand curve for labour downward sloping. So, this is contradicting!
Also, why is the supply curve for labour in a monopoly upward sloping? If there is only ONE buyer in the labour market, shouldn't the workers be satisfied with lower wages as there is only one employer? if that employer don't employ them, then they will have no job!

A local pizzeria sells 500 large pepperoni pizzas per week at a price of $20 each. Suppose the owner of the pizzeria tells you that the price elasticity of demand for his pizza is -2, and he asks you for advice. He wants to know two things. First, how many pizzas will he sell if he cuts his price by 10%? Second, how will his revenue be affected?

explain a drought around the world raises the total revenue that farmers receives from the sale of grains but a drought only in punjab reduces the total revenue that farmers in punjab receive ?