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Assume that a consumer consumes two commodities X and Y and makes five combinations for the two commodities
Combinations. X. Y.
A. 25. 3
B. 20. 5
C. 16. 10
D. 13. 18
E. 11. 28
Calculate marginal rate of substitution and explain the answer ?
I want answer formula explanation conclusion
PROBLEM SET 2- PART 1
Question 1 - Elasticity
You are an analyst employed by a yacht manufacturer that last year sold 30,000 luxury yachts at $500,000 each. Your market research indicates that:
i) the price elasticity of demand for your aircrafts in −0.5. (or +0.5 in absolute value);
ii) the income elasticity of demand for your aircrafts is +2.6; and
iii) the cross price elasticity for your aircrafts with respect to the price of a comparable jet manufactured by a competitor is +1.4.
C. Now suppose that the only change you expect is a 6% increase in the price of your aircraft. Estimate sales this year and discuss the impact on total revenues (5 MARKS)
Lungameni Enterprises manufactures Product A selling it to local customers at a mark up of 25%. They currently absorbs overheads costs on the basis of direct labour hours. Production v
Suppose that the income elasticity of demand for potatoes is −0.5 and the cross-price elasticity of demand for potatoes, with respect to the price of carrots, is 2. What will happen to the quantity demanded of potatoes when
a. There is a recession?
24 months calculation
From this equation the expected sales for the next 12 months can be estimated.
Q = 6 200 – 40P + 25PC + 6.2Y + 0.3A + 0.20S
(2.002) (17.5) (6.2) (2.5) (0.09) (0.21) – standard deviation (SEC)
R2 = 0.55 n = 55 F = 4.88
• Q = Quantity sold per month (sales)
• P = Price = R2 900
• PC = Price of leading competitor’s product = R3 200
• Y = Average per capita income in the country = R25 000
• A = Homebase’s monthly advertising expenditure = R20 000
• S = Number of robot vacuum cleaners sold across the country =
7 000
2.1 Calculate the number of iRobot-H vacuum cleaners that H
is expected to sell over the next 12 months.
2.2 Calculate the elasticities for the price of iRobot-H (P), the product of the
leading competitor (PC), average income (Y) and advertising income (A).
2.3 What is the meaning of the variables –40P, +6.2Y and 0.20S?
2.4 What is the meaning of the equation R2= 0.55?
2.5 Determine the t-values for P, PC and Y, and discuss their significance.
Explain the relationship between total revenue and the price elasticity of demand.
Which point depicts the monopoly equilibrium in the above figure? What will be the
price charged and quantity produced by this monopolist? 2
(ii) What would have been the equilibrium output and price had it been a perfect
competitive industry? Compare your result with that of a monopoly. 2
(b) Why a monopolist does not produce on the inelastic part of its demand curve? 3
(c) A monopolist has cost function TC = 10 + 2Q, where TC is the total cost of producing
Q units of output. Demand in this market is given by theequation Q = 14 – P, where P
stands for the price. Calculate the profit that the monopolist will be making
The peanut butter manufactures are all buying equipment that can make peanut butter two times faster than before: the supply of peanut butter will
2. A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5. (4 points).
A. Draw the budget line.
B. What happens to the original budget line if the budget falls by 25%?
C. What happens to the original budget line if the price of X doubles?
D. What happens to the original budget line if the price of Y falls to $4?
2. A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5. (4 points).
A. Draw the budget line.
B. What happens to the original budget line if the budget falls by 25%?
C. What happens to the original budget line if the price of X doubles?
D. What happens to the original budget line if the price of Y falls to $4?
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