Define the income elasticity of demandWhat is a normal and an inferior good?Define the cross-price elasticity of demandCompare and contrast monopoly and perfect competition market structure in long-run.

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Define the income elasticity of demand

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter9: Market Structure And Long-run Equilibrium

Section: Chapter Questions

Problem 9.3IP

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Define the income elasticity of demand
What is a normal and an inferior good?
Define the cross-price elasticity of demand
Compare and contrast monopoly and perfect competition market structure in long-run.

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Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
Inverse elasticity rule Use the first-order condition (Equation 15.2 ) for a Cournot firm to show that the usual inverse elasticity rule from Chapter 11 holds under Cournot competition (where the elasticity is associated with an individual firm's residual demand, the demand left after all rivals sell their output on the market). Manipulate Equation 15.2 in a different way to obtain an equivalent version of the inverse elasticity rule: pMCp=sieQ,p , where si=qi/Q is firm i's market share and eQp is the elasticity of market demand. Compare this version of the inverse elasticity rule with that for a monopolist from the previous chapter.
Q2. a) define the income elasticity of demand? b) what is the normal and an inferior good? c) define the cross-price elasticity of demand? d) Compare and contrast monopoly and perfect competition market structures in the Long-run.
Describe the concept of price elasticity? Why it is for a monopoly less profitable to act inmarkets with high price elasticity?
A monopoly sells its good in the United States, where the elasticity of demand is −2.5, and in Japan, where the elasticity of demand is −5.3. Its marginal cost is $7. At what price does the monopoly sell its good in each country if resales are impossible? The price in the United States is $_____. (Round your answer to the nearest penny.) The price in Japan is $____. (Round your answer to the nearest penny.) Only typed answer