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Explain the term price elasticity of demand? How is it measured? What factors influence market
demand for products? If the price elasticity is -3 and RM 100 is the marginal cost of product
X, what should be the optimal sale price?
(Hint: apply the mark-up rule)
Mr. Hamid Mohammad is planning to pursue MBA studies. Initial inquiry shows that he will have to pay RM 25,000 as tuition fee, buy books for RM 1000, pay for transport RM 500. The MBA study programme will extend over 15 months. Mr Hamid is working now with a salary of RM 2,500 per month.. Being a full time student, he will have to forego the income from his present job for the period of study. Work out the (a) Financial cost, and (b) the Economic Cost of doing MBA (Hint: Identify implicit costs and explicit costs)
a consumer has a utility function u(x1,x2) =max{x1,x2} what is the consumer's demand function for good 1?
P1 = 32 − 2Q1
P2 = 22 − 0.5Q2
Pete enjoys rock concerts and the opera. The table shows the utility he gets from each activity: Concerts Utility from Utility from per month rock concerts operas 1 120 200 2 100 160 3 80 120 4 60 80 5 40 40 6 20 0 Pete has a200 a month to spend on concerts. A rock concert ticket is a20, and an opera ticket is a40. How many rock concerts and how many operas does Pete attend?
Max enjoys windsurfing and snorkelling. He obtains the following utility from each of these sports: Hours Utility from Utility from per day windsurfing snorkelling 1 120 40 2 220 76 3 300 106 4 360 128 5 400 140 6 412 150 7 422 158 Max has a35 to spend and he can spend as much time as he likes on his leisure pursuits. Windsurfing equipment rents for a10 an hour, and snorkelling equipment rents for a5 an hour. a Draw a graph that shows Max’s budget line. b How long does he spend windsurfing and how long does he spend snorkelling?
Jason enjoys rock CDs and spy novels and spends a60 a month on them. The following table shows the utility he gets from each good: Quantity Utility from Utility from per month rock CDs spy novels 1 60 20 2 110 38 3 150 53 4 180 64 5 200 70 6 206 75 a Draw graphs showing Jason’s utility from rock CDs and from spy novels. b Compare the two utility graphs. Can you say anything about Jason’s preferences?
Lee’s and Lou’s demand schedules for CDs are: Quantity demanded by Price Lee Lou (euros per CD) (CDs per year) 6 12 10 8 98 10 6 6 12 3 4 14 0 2 If Lee and Lou are the only two individuals, what is the market demand for CDs?
Max takes a Club Med vacation, the cost of which includes unlimited sports activities. There is no extra charge for equipment. If Max windsurfs and snorkels for 6 hours a day, how many hours does he windsurf and how many hours does he snorkel?
Pete, in problem 6, wins a lottery and has more than enough money to satisfy his desires for rock concerts and opera. He decides that he would like to attend a total of 7 concerts each month. How many rock concerts and how many operas does he now attend?
