Microeconomics Answers

Suppose that the demand curve for garbanzo beans

is given by

Q ¼ 20 - P. where Q is thousands of pounds of beans bought per

week and P is the price in dollars per pound.

a. How many beans will be bought at P ¼ 0?

b. At what price does the quantity demanded of

beans become 0?

c. Calculate total expenditures (P Æ Q) for beans

of each whole dollar price between the prices

identified in part a and part b.

d. What price for beans yields the highest total

expenditures?

e. Suppose the demand for beans shifted to

Q ¼ 40 -2P. How would your answers to

part a through part d change? Explain the differences intuitively and with a graph

3.

The manager of a Cape Town superette carries a stock of Jive soft drinks. The country experiences an economic recession which yields an anticipated consumer income decrease of 6 %. As a result, the income elasticity of demand for this product is estimated to be –2.5.

(a) Calculate the percentage change in the quantity of your soft drink orders required to accommodate the new demand without a surplus or shortage of inventory.

(b) What does the elasticity coefficient of –2.5 reveal?

2

Surgex Ltd produces surgical masks and its market is characterised by the following equations

𝑸 = 15 − 0.2P ; 𝑸s = −𝟏 + 0. 6P

(a) Using a diagram, draw the demand and supply curve. [show all workings]

(b) Calculate the equilibrium price and quantity

(c) Calculate the consumer surplus

1.

In South Africa, entrepreneur Hloki Raphuting, founder of PalmH, manufactures high-quality bags and shoes all made from the finest leather. Draw a PPC illustrating the production combinations of leather bags and leather shoes. On the same diagram illustrate and explain what would happen to the PPC if PalmH acquired additional resources for producing both shoes and bags.

If demand (Qd)=100 -14p; and supply (Qs)= 50+6p; then at what price will there be a surplus of 60 units?

If Alexi devoted half of his time (5 out of 10 hours) to making street tacos and half of his time to making Cuban sandwiches, how many of each would he produce in a week? If Tony did the same, how many of each would he produce? How many street tacos and Cuban sandwiches would be produced in total?

In the short run K is fixed at 16,000 hours. What is the short run demand for labor?

Solve the following problems on Price elasticity of demand and classify the nature of

elasticity and good.

1) The demand for a CDs is 1000 units and the price is Rs. 20/- per CD. Later on the price rises

to Rs.22/- per CD as result the demand falls to 870 units.

2) The demand for a commodity is 80 units and the price is Rs. 14 /- per unit. In the next month,

the price falls to Rs.10/- per unit and the demand rises to 88 units.