Answer to Question #217706 in Economics for John

Question

Louis has $50 to decide on consuming coffee (C,with price Pc) and Tea (T, with price Pt). He has utility function u(C,T)=12C-C^2+T.

a) holding Louis' income I=$50 Pt=$1 but Pc=P as a variable, what is Louis' demand function on coffee (use Cd/l as Louis' quantity demanded on Coffee)

b)George also a coffee lover. George has the inverse demand on Coffee as P=6-3Cd/g. assume there are only Louis and George in the market of coffee what its total market demand of Coffee (denoted by Cd/m)

c)plot Louis', George and Total market demand of coffee in same graph make sure u indicate the coordination of the kink point on the total market demand curve

d) when Pc=4 what its the total market's quantity demanded and the price elasticity of total markets demand at this point? does the coffee supplier have the incentive to increase price of coffee

suppose the inverse market supply is given as P=Cs/m plot it on the same graph as question c. what is equilibrium price and quantity? can you do analysis in question d?

Answer 1

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