Assume that the market demand for cheese is given by the function Qd=252-4P , and the supply is perfectly inelastic such that Qs=172, as farmers cannot change the quantity supplied of cheese in the short-run. Calculate the following: 1. The consumer surplus in the market for cheese. 2. The own-price elasticity of demand for cheese at the price of $40 per unit. 3. The reservation price of consumers, at the point where the elasticity of demand is equal to 0.189.

Assume that the market demand for cheese is given by the function Qd=252-4P , and the supply is perfectly inelastic such that Qs=172, as farmers cannot change the quantity supplied of cheese in the short-run. Calculate the following: 1. The consumer surplus in the market for cheese. 2. The own-price elasticity of demand for cheese at the price of $40 per unit. 3. The reservation price of consumers, at the point where the elasticity of demand is equal to 0.189.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

ChapterP2: Microeconomics Policy Issues

Section: Chapter Questions

Problem 3KC

See similar textbooks

Similar questions

(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?
Which of the following would not cause market demand for a normal good to decline? a. An increase in the price of a substitute b. An increase in the price of a complement c. A decline in consumer income d. Consumer expectations that the good will go on sale in the near future e. An announcement by the Surgeon General that the product contributes to premature death
For each of the determinants of demand in Equation 2.1, identify an example illustrating the effect on the demand for hybrid gasoline-electric vehicles such as the Toyota Prius. Then do the same for each of the determinants of supply in Equation 2.2. In each instance, would equilibrium market price increase or decrease? Consider substitutes such as plug-in hybrids, the Nissan Leaf and Chevy Volt, and complements such as gasoline and lithium ion laptop computer batteries.
Prove that price elasticity of demand is not the same as the slope of a demand curve.