Microeconomics Answers

When an individuals income rises ceteris paribus, demand for a loaf of bread a normal good

Consider the market for coffee beans. Suppose that the prices of all other caffeinated beverages

go up 30 percent while at the same time a new fertilizer boosts production at coffee plantations

dramatically. Can you tell what will happen to the equilibrium price? What about the equilibrium

quantity?

As South Africa has a large contingent of unemployed and low skilled workers how do you see the integration process affecting the mismatch between the demand and supply of labour within the country?

if the utility function is given by u=x^2y^2 what is marginal utility?

1.     Assume a market has the following demand and supply functions:

Q_D = 28-3P

Q_S = 2P-12

Where P is the price

a)     Determine algebraically the equilibrium price and quantity.

b)     Plot the demand and supply curves and confirm your answer.

c)     Suppose supply shifts to Q_s =2P – 2 with no change no change in demand. Determine the new equilibrium price and quantity.

d)    Although the supply curve shifts to the right by 10, the quantity exchanged does not rise by 10, explain why the increase in quantity is smaller.

Consider the perfect competitive market for diesel.The aggregate demand for gasoline is Qd=100-p ,While the aggregate supply is Qs=3p

a)Work out the equilibrium price and quantity.

b) at the equilibrium level established in part a calculate the consumer surplus, producer surplus and total surplus.

c) it is established that the most fuel stations are going out of business to address this problem, the government decides to set a minimum price of p==30. What will be the new equilibrium price and quantity? What will be the new consumer surplus and producer surplus? Who gains and who loses from this regulation? Explain how the total surplus is affected? Briefly explain the intuition.

• Price of tickets increased from $200 to $250.The demand equation Qd=2000-5p is the representative for train tickets between point A and Point B.

a)Calculate the old price quantity demanded level.

b)calculate new price quantity demanded level.

c)work out the price elasticity of demand for tickets from point A to point B between $200 and $250.

d)briefly discuss the price elasticity of demand for tickets from point A to point B between $200 and $250 and clarify how train fleets revenues are expected to respond to the price increase.

e) what would be the price elasticity of demand for tickets from point a to point b if the price rises again $250 to $300?

f)explain why the answer in part d)and e) are different