Microeconomics Answers

Do each of a-d, both geometrically (you need not be precise) and using calculus. There are only two goods; x is the quantity of one good and y of the other. Your income is I and u(x,y) = xy + x + y.

(a) Px = $2; Py = $1; I = $15. Suppose Py rises to $2. By how much must I increase in order that you be as well off as before?

D.What is the consumer and producer surplus when the market for toasters is in equilibrium (when the quantities supplied is equal to the quantities demanded)? The inverse demand function is p = 60 - Q and the supply function is Q = 10 + p. Explain your result and draw a very precise graph of the demand and supply functions to show your results.

E. Suppose that the inverse demand function has become p = 80 - Q due to changes in the consumer income but no change in the supply function, Q = 10 + p. What is the new consumer and producer surplus when the market for toasters is in equilibrium (when the quantities supplied is equal to the quantities demanded)? Compare your result with the one you have obtained in (d) and explain the changes in consumer and producer surplus and show it on a diagram

A. If the inverse demand function for toasters is p = 60 - Q , what is the consumer surplus if price (p) is $30? Explain your result and show it very precisely on a diagram.

B. If the inverse demand function for toasters is p = a - b Q , what is the consumer surplus if price is a 2 ? Show it very precisely on a diagram and explain how changes in the constant term (a) and the coefficient of Q (b) cause an increase in the consumer surplus . C. If the supply function for toasters is Q = 10 + p, what is the producer surplus if price is 20? Explain your result and show it on a diagram.

 Assume now that you do not think incomes will change, but that you expect  your competitor will decrease his price by 4%. Assuming that your company  does not change the price of its aircrafts, how many would you expect your  company will sell this year?

Stuart's utility function for goods X and Y is represented as U(X,Y)=X0.8Y0.2. Assume that his income is $100 and the prices of goods X and Y are $20 and $10, respectively.

Now a government subsidy program lowers the price of X from $20 per unit to $10 per unit.

(e) Calculate and graphically show the change in good X consumption resulting from the program.

(f) Graphically show the change in consumption attributable to the separate income and substitution effects.

(g) Show (graphically) how much the program cost the government.

1. What is production

2. What is a production function

3. Define the following terms

(a) Average product (b) marginal product ( c) total product

4. Distinguish between short run and long run

5. Distinguish between increasing returns to scale, constant returns to scale, and

decreasing returns to scale?

6. Determine whether the following functions exhibit increasing returns, constant returns

and decreasing returns to scale and determine the degree of homegeneity

i. Q = 200 𝐾0.4𝐿0.6

ii. Q = 200 + 2K +4L

iii. Q = LK -0.8K2 -0.2L2

Qd = 20,000 - 3P Qs = 15,000 + 2P

calculate the equilibrium price and quantity

The price of matchboxes doubles from Rs.4 to Rs.6, but the quantity purchased does not change. d) A price change causes the quantity demanded of a good to decrease by 30 percent, while the total revenue of that good increases by 15 percent. Is the demand curve elastic or inelastic?

n each of the following snerios, categories the price elasticity of demand as either elastic, inelastic or unit elastic.(use mid point method in calculation)

a) The price of personal computers falls from $2750 to $2250 and the quantity demanded increases from 40,000 to 60,000

b) Pakistan posts increases the price of stamp for Rs.2 cents to Rs 4,but it's total revenue unchanged

Assume that a firm has a plant of fixed size and that it can vary its output only by varying the amount of labor it employs. The table below shows the relationships between the amount of labor employed, the output of the firm, the marginal product of labor and the average product of labor