Consider a market in which supply depends on current price qt = b0 + b1pt + ut b1 > 0 while demand depends not only ont he current price, but also on the price rationally expected to prevail in the near future: qt = a0 + a1pt + a2Etpt+1 + vt Here a1 < 0 and a2 > 0 while ut and vt are white-noise disturbances. Find solution for pt.

Consider a market in which supply depends on current price qt = b0 + b1pt + ut b1 > 0 while demand depends not only ont he current price, but also on the price rationally expected to prevail in the near future: qt = a0 + a1pt + a2Etpt+1 + vt Here a1 < 0 and a2 > 0 while ut and vt are white-noise disturbances. Find solution for pt.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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Consider a market in which supply depends on current price qt = b0 + b1pt + ut b1 > 0 while demand depends not only ont he current price, but also on the price rationally expected to prevail in the near future: qt = a0 + a1pt + a2Etpt+1 + vt Here a1 < 0 and a2 > 0 while ut and vt are white-noise disturbances. Find solution for pt.
Let the following demand and supply equations be respectively:D = 5p ́ ́-4p ́ + 11S = 6p ́ ́-2p ́ + 5p-4Find p (t) with the hypothesis that the market is in equilibrium with the conditionsinitials p (0) = 4 and p ́ (0) = 7
Demand for Orange Juice is given as Qd = 5000 – 2500 P + 1200 I + 650E – 255 Ps Suppose Income is I = Rs.500, Expectations E = 55, and Price of Ps = Rs 25. Find the Demand Equation. Using the demand function from part a., Calculate Elasticity of Demand for price range of Rs.125 and Rs.155. What will be the ‘Price Elasticity of Demand’ at P = Rs.125? Interpret the Elasticity of Demand calculated in (C) above.
Demand for Orange Juice is given as Qd = 5000 – 2500 P + 1200 I + 650 E – 255 Ps Suppose Income is I = Rs.500, Expectations E = 55, and Price of Ps = Rs 25. Find the Demand Equation. Using the demand function from part a., Calculate Elasticity of Demand for price range of Rs.125 and Rs.155. C.What will be the ‘Price Elasticity of Demand’ at P = Rs.125? D.Interpret the Elasticity of Demand calculated in (C) above
an entrepreneur is setting up a storage facility which will provide storage bothat peak times and off peak times.The entrepreneur need to decide how much money storage Q1 t to supply at peak times, and how much storage Q2 to supply off peakit also needs to decide how to set up capacity K, where capacity is such that both K is equal or plus Q1 and K is equal or plus Q2The peak period demand fan storage is given by PI=7200 -Q1 and the off peak is give by P2=5400 -Q2 where P1 and P2 are the prices for units of storage at peak times and off peak respectively.the variable cost is 200 per unit of storage supplied and capacity costs are 100 per unit. Hence profits fpr the entrepreneurs are given by:(7200-Q1) Q1+ (5400-Q2) Q2 - 200 (Q1+Q2)-100 K where Q1 is less or equal K and Q2 is less or equal Ka) write down the Kuhn-Tucken conditions for this proble. b) Find the optimal outputs and capacity for this problemc) now suppose there is a substancial increqse in capacity costs, which rise to 2000…
Demand for Orange Juice is given as Qd = 5000-2500 P + 1200 I +650E - 255 PS Suppose Income is I = Rs.500, Expectations E = 55, and Price of Ps= Rs 25. Find the Demand Equation. b. Using the demand function from part a., Calculate Elasticity of Demand for price range of Rs.125 and Rs. 155. What will be the 'Price Elasticity of Demand at P = Rs.125? d Interpret the Elasticity of Demand calculated in (C) above.
Demand for Orange Juice is given asQd = 5000 – 2500 P + 1200 I + 650 E – 255 PsSuppose Income is I = Rs.500, Expectations E = 55, and Price of Ps = Rs 25.a. Find the Demand Equation.b. Using the demand function from part a.,Calculate Elasticity of Demand for price range of Rs.125 and Rs.155.c. What will be the ‘Price Elasticity of Demand’ at P = Rs.125?d. Interpret the Elasticity of Demand calculated in (C) above.
Suppose there are lemon (used) cars worth every price from ZMW1,000 to ZMW3000 to new owners, with each price equally likely. Further you expect that a car worth X to a new owner is worth 0.75X to its current owner. Suppose that there is a ﬁnite supply of cars at each price, while there is a much larger number of potential buyers (so the equilibrium price is the valuation of the potential buyer). Lastly assume that the quality of the car is unknown to potential buyers, due to information asymmetry. (a) Calculate the equilibrium price and average quality of cars sold. (b) Which cars are sold and which ones are not? (c) Is the equilibrium eﬃcient?
Consider the “Trip Logistic” example discussed in class (i.e. base case). Please solve the same problem with each of the following changes, and compare the results with those of the basecase: a) The spot market price (in period 0) is reduced to $0.55 per sq. ft. per year. Assume that everything else remains the same as the base-case. b) There is a lower demand uncertainty: Demand can go up by 5% with p= 0.5 or down by 5% with 1 − p= 0.5. Assume that everything else remains the same as the base-case.
Demand for Orange Juice is given as Qd = 200 – 300 P + 120 I + 65 T – 250 Pc + 400 Ps Suppose Income is I = $10, Expectations T = 60, Price of Pc = $15 and Ps = $10. Find the Demand Equation. Using the demand function from part a., Calculate Elasticity of Demand for price range of $10 and $11. What will be the ‘Price Elasticity of Demand’ at P = $10? Interpret the Elasticity of Demand calculated in (C) above.
A ski resort in the White Mountains has conducted market and cost studies, and has determined that the demand and supply for ski-lift tickets at their resort are represented by: Qd=1750 - 5P - 8PR + 2PB; Qs=50 + 20P - 3PE. In these equations, P represents the price of a full-day lift ticket, in dollars per ticket; PR is the price of a ski-rental package; PB is the price of a pint of beer at the local pub in the nearby town; and PE is the price per megawatt hour for the electricity used to run the chair lifts on the ski slopes. Based on the equations above, determine whether the beer in the local pub is a substitute or complement to skiing. Briefly explain your answer. Suppose the price of a ski-rental package is $20, the price of a pint of beer is $5, and the price of electricity is $150 per megawatt hour. Calculate equilibrium price and quantity of ski-lift tickets. Now consider the more general relationship between the price of lift tickets and the price of ski-rental packages.…
The demand equation for the Widget Company has been estimated to be: Q = 20,000 + 10 I - 50P + 20 PC where Q = monthly number of widgets sold, I = average monthly income, P = price of widgets, and PC = average price of competing goods. If next month's income is forecast to be 2,000, the price of competing goods is forecast to be $20, and the price of widgets will be set at $30, forecast sales. b. What will sales be if the price is dropped to $20?