Microeconomics Answers

What are the two main points of Law of demand? Illustrate law of demand with schedule and graph.

(04) 

(b) Define Elasticity of demand. Calculate price elasticity of demand for the given data:

(04)

Case A

Case B

Price

80

100

Quantity

230

150

State whether the Statement is TRUE or FALSE. Also write the reason (Without reason your answer will not accepted)

a) If value of cross price elasticity is positive then it means there are less close substitutes are available of that product.

b) In case of luxury products, the own price elasticity of demand is greater than one.

c) If salaries of journalist go up then demand curve of newspaper will shift upward.

d) When price elasticity of supply is greater than one it means supply curve is flatter.

Importance of elasticity of demand

2.Assume Susan and Andre are siblings. They make bracelets to give neighborhood friends. Before they are allowed to go outside and play, they must make the 12 beds in their house. They have 1 hour before their friends will gather in the park, and the siblings want to have as many bracelets as possible when they meet their friends.

Susan can make 2 beds in 10 minutes. Andre can make 4 beds in 15 minutes.

Susan makes 3 bracelets in 30 minutes. Andre makes 2 bracelets in 30 minutes.

1. Identify Susan’s opportunity cost for each bracelet she makes. Identify her opportunity cost of making a bed.
2. Identify Andre’s opportunity costs for each activity.
3. Andre wants to share the bed-making equally and suggests they both make 6 beds. Suzy wants Andre to make all the beds while she makes bracelets. Who is the better economist? Why?
4. Given they have to make twelve beds, what is the maximum number of bracelets the siblings can make before they go to the park? Show your work or explain.

elucidate price and output determination under cournot and stackelberg models of oligopoly

step by step how to calculate MUX and MUY of U=X^0.5Y^0.5

1. Given the demand function P= 20-5Q, find the price elasticity of demand when price of the commodity is 5 Birr per unit. Mention if the demand is price elastic or inelastic at this point

What economic information does the income elasticity of demand provide? How does the shape of the

Engel curve relate to the income elasticity?

Q.3 A firm uses Labour (L) and Capital (K) to produce commodity (Y). The quantities of the inputs and

outputs are shown in the table below.

L 0 1 2 3 4 5 6 7 8 9 10

K 90 90 90 90 90 90 90 90 90 90 90

Y 0 100 250 420 560 675 760 820 860 885 900

c. Does the average variable cost cuts the marginal cost at the minimum point of the marginal cost? Why

is this always the case? What is the relationship between the marginal cost and average variable cost in

the second stage of production.

d. What are the most critical assumptions used to define a perfectly competitive market. How do these

assumptions relate to the determination of short run equilibrium of the firm in a perfectly competitive

market.

e. Using the data given in this question, determine the short run supply curve of the firm. If there are 15

identical firms in the market, what will be the market supply?