Search & Filtering
In a perfectly competitive market, the market demand curve is , and the market supply curve is .
(a) What is the equilibrium price and quantity in the absence of government intervention? (2 marks) (max 200 words)
(b) Consider two possible government interventions: (1) A price ceiling of $1 per unit; (2) a subsidy of $5 per unit paid to producers. What are the prices in each of these interventions (2 marks) (max 200 words)? What are the quantities supplied and demanded under each government intervention? (2 marks) (max 200 words)
(c) How will consumer surplus differ in these different government interventions? (2 marks) (max 200 words)
(d) For which form of intervention will we expect the product to be purchased by consumers with the highest willingness to pay? (2 marks) (max 200 words)
(e) What is deadweight loss. Explain (1 mark) (max 50 words)
(f) Which government intervention results in the lower deadweight loss and why (2 marks) (max 200 words)?Explain with diagram (2 marks) (max 200 words)
Suppose you are on a three-day trip to Rome (from Monday to Wednesday) and during your stay you decide to consume only Waffle and Ravioli (measured on the horizontal and vertical axes respectively). You have a given amount of money (some constant) to spend on each of the three days. Suppose that the price of Waffle rises between Monday and Tuesday. If your optimum points of consumption on Monday and Tuesday are respectively called M and T, such that M to the left of T, what does it say about both the commodities? Illustrate your answer using an appropriate diagram
Sanjana loves to read books(B) and likes to watch movies(M) as well. She derives double the satisfaction from reading a book than watching a movie. Her utility function is as follows
U(B, M) = 2B + M
Where B and M are the number of books and movies respectively.
a. Explain the shape of the indifference curve using diagrams. [3 MARKS, Word limit: 200]
b. The income available with her is INR60. And price of movie ticket is INR 10 and that of a book is INR 15. Will she spend her entire budget and why? What will be her consumption, explain why? [4 MARKS, Word limit: 300]
Sanjana loves to read books(B) and likes to watch movies(M) as well. She derives double the satisfaction from reading a book than watching a movie. Her utility function is as follows
U(B, M) = 2B + M
Where B and M are the number of books and movies respectively.
a. Explain the shape of the indifference curve using diagrams. [ Word limit: 200]
b. The income available with her is INR60. And price of movie ticket is INR 10 and that of a book is INR 15. Will she spend her entire budget and why? What will be her consumption, explain why? [Word limit: 300]
Q2. Suppose you are on a three-day trip to Rome (from Monday to Wednesday) and during your stay you decide to consume only Waffle and Ravioli (measured on the horizontal and vertical axes respectively). You have a given amount of money (some constant) to spend on each of the three days. Suppose that the price of Waffle rises between Monday and Tuesday. If your optimum points of consumption on Monday and Tuesday are respectively called M and T, such that M to the left of T, what does it say about both the commodities? Illustrate your answer using an appropriate diagram
U(B, M) = 2B + M
Where B and M are the number of books and movies respectively.
a. Explain the shape of the indifference curve using diagram
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?
