1. Suppose there are two consumers in the market for product X. They have the following inverse individual demand curve: Py- 20 - 0.005qı + 0.IPy. P-25 - 0.01q + 0.2Py. where Py represents price in dollars per unit, Q represents rate of sales in pounds per week, and PyY represents selling price of another product Y in dollars per unit. The inverse supply curve of product X is given by: Px-5 + 0.004Q. The initial price of the product Y is S10. Derive the market demand curve and function. Draw the individual demand curve and a) market curve in a diagram. b) supply curve in a diagram and indicate the equilibrium price and sales in your diagram. c) Determine the equilibrium price and sales of X. Draw the market demand curve and Compute price elasticity of demand for product X and cross elasticity of demand for
1. Suppose there are two consumers in the market for product X. They have the following inverse individual demand curve: Py- 20 - 0.005qı + 0.IPy. P-25 - 0.01q + 0.2Py. where Py represents price in dollars per unit, Q represents rate of sales in pounds per week, and PyY represents selling price of another product Y in dollars per unit. The inverse supply curve of product X is given by: Px-5 + 0.004Q. The initial price of the product Y is S10. Derive the market demand curve and function. Draw the individual demand curve and a) market curve in a diagram. b) supply curve in a diagram and indicate the equilibrium price and sales in your diagram. c) Determine the equilibrium price and sales of X. Draw the market demand curve and Compute price elasticity of demand for product X and cross elasticity of demand for
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.14P
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Transcribed Image Text:1. Suppose there are two consumers in the market for product X. They have the following inverse
individual demand curve: Py-20 - 0.005g + 0.IPy. P= 25 - 0.01q + 0.2Py.
where Py represents price in dollars per unit, Q represents rate of sales in pounds per week, and PY
represents selling price of another product Y in dollars per unit. The inverse supply curve of
product X is given by: Py =5+0.004Q. The initial price of the product Y is $10.
Derive the market demand curve and function. Draw the individual demand curve and
a)
market curve in a diagram.
b)
supply curve in a diagram and indicate the equilibrium price and sales in your diagram.
c).
product X at the equilibrium values. Determine whether X and Y are substitutes or complements.
d)
Determine the equilibrium price and sales of X. Draw the market demand curve and
Compute price elasticity of demand for product X and cross elasticity of demand for
Suppose the price of product Y increases from $10 to $12, what is the impact on the
equilibrium price and sales?
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