Microeconomics Answers

John has a utility function
U(B,Z)=AB^(1/α) Z^(1/β), where A, α and β are constants, B is burritos, and Z is pizzas. If the price of burritos, Pb is 10 and the price of pizzas, Pz, is N$5, and Y is N$1790, what is John’s optimal bundle

John has a utility function
U(B,Z)=AB^(1/α) Z^(1/β), where A, α and β are constants, B is burritos, and Z is pizzas. If the price of burritos, Pb is 10 and the price of pizzas, Pz, is N$5, and Y is N$1790, what is John’s optimal bundle

Mandla has a utility function U(B,Z)=AB^(1/α) Z^(1/β), where A, α and β are constants, B is burritos, and Z is pizzas. If the price of burritos, Pb is 10 and the price of pizzas, Pz, is $5, and Y is $1790, what is Mandla’s optimal bundle?

U(B,Z)=AB^(1/α) Z^(1/β), where A, α and β are constants, B is burritos, and Z is pizzas. If the price of burritos, Pb is 10 and the price of pizzas, Pz, is N$5, and Y is N$1790, what is John’s optimal bundle

John has a utility function
, where A, and are constants, B is burritos, and Z is pizzas. If the price of burritos, Pb is 10 and the price of pizzas, Pz, is N$5, and Y is N$1790, what is John’s optimal bundle

mandla has a utility function
U(B,Z)=AB^(1/α) Z^(1/β), where A, α and β are constants, B is burritos, and Z is pizzas. If the price of burritos, Pb is 10 and the price of pizzas, Pz, is $5, and Y is $1790, what is mandla’s optimal bundle

Another explanation for why queues may exist is so restaurants can practise price discrimination, which is sometimes illegal. By restricting the quantity supplied, the owner can adopt ‘behind the counter’ or ‘not on the books’ policies that give priority seating and special bookings to customers who are willing to pay more. In addition, because these payments are not on the records the owner does not pay taxes on them.

a) With the help of an appropriate graph (for simplicity, assume the seller is a monopoly), show how a firm can profit by restricting the quantity it sells (while keeping the legal price the same), while practising price discrimination with a subset of consumers.

Effect on the price and output of fresh maize of adverse conditions,The effect on the price and output of oranges of an increase in consumer income

Another explanation for why queues may exist is so restaurants can practise price discrimination, which is sometimes illegal. By restricting the quantity supplied, the owner can adopt ‘behind the counter’ or ‘not on the books’ policies that give priority seating and special bookings to customers who are willing to pay more. In addition, because these payments are not on the records the owner does not pay taxes on them.

a) With the help of an appropriate graph (for simplicity, assume the seller is a monopoly), show how a firm can profit by restricting the quantity it sells (while keeping the legal price the same), while practising price discrimination with a subset of consumers.

The author suggests that queuing is the result of consumers enjoying having access to the restaurant when other people do not enjoy similar access; i.e. there is value from exclusivity (note: not mentioned in the extract above). Sellers therefore strategically choose to restrict the quantity supplied, while keeping prices low.
For simplicity, assume the seller is a monopoly and use an appropriate graph to show the potential gains and losses to profit if the seller chooses to restrict the quantity supplied under the ‘value from exclusivity’ assumption above.