Microeconomics Answers

Over the years, the market demand for “long-playing records made of polyvinyl has fallen considerably as new technologies replaced the old “LP.” Yet, LPs are still available for sale and they sell at price points higher (in some cases much higher) than CDs. According to economic theory, when demand falls, the price of a product should fall. Explain this apparent contraction between theory and fact.

9. Show that if the marginal product is always decreasing, the average product is always above the marginal product.

With respect to Cobb Douglas preferences more generally, what happens to the demand for each of two products (say, x and y) when the price of one product (say, x) changes as a result of the: (i) substitution effect; and, (ii) income effect?

For product y (i.e. not product x), find own price elasticity of demand, income elasticity of demand and cross-price elasticity of demand. Briefly explain/interpret each of these three numerical results. 

Desire the income offer curves and engel curves for commodity x for the following utility functions , assuming Px=Py=1. a) u(x,y) = max(2x,3y). b) u(x,y)= x-y

Given market demand Qd = 50 - P, and market supply P = Qs + 5

A) Find the market equilibrium price and quantity?

B) What would be the state of the market if market price was fixed at Birr 25 per unit?

C) Calculate and interpret price elasticity of demand at the equilibrium point.

The demand for tickets to an Ethiopian camparada film is given by D(p)=20,000-10,000p, where p is the price of tickets. If the price of tickets is 12 birr. Calculate price elasticity of demand for tickets and draw the demand curve?

a) Suppose the demand for a product is given by p=d(q)=-3q²+6q+436  where  q is the quantity and p is the price in Ghana Cedis. Using calculus, estimate the effect of an increase in price from GH¢196.00 to GH¢250.00 on the welfare of the consumer.Using the concept of own elasticity of demand, decide whether the producer should accept this price increase in order to increase revenue.

Distinguish the difference between monopsony and monopoly. Provide two graphical

illustrations to aid your discussion when comparing monopsony and monopoly. [6]

The market for electricity in Utopia is characterised by the following equations

Qd = 100-5P ; Qs = 50+5P

(b) Suppose the government of Utopia set a maximum price of R2.50 per unit of electricity. Explain and show in the graph drawn in (a) the effect of the government intervention in the electricity market.