How will the managements of the two brands study the short-run and long-run impact on Tea Sales, after the announcement of promotions in the market of Tea? Demonstrate and explain, with clearly labelled two panel diagrams, the ‘Rationing Function’ and the Allocating or ‘Guiding Function’ of Price
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QUESTION 1:
Assume Tea brands ChotooChai and BaraChai are competing brands in the market. With arrival of winter season, ChotooChai announces good promotional deals. Using ‘Comparative Statics Analysis’ of
- How will the managements of the two brands study the short-run and long-run impact on Tea Sales, after the announcement of promotions in the market of Tea?
- Demonstrate and explain, with clearly labelled two panel diagrams, the ‘Rationing Function’ and the Allocating or ‘Guiding Function’ of
Price .
QUESTION 2: 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
- What will be the ‘
Price Elasticity of Demand ’ at P = Rs.125? - Interpret the Elasticity of Demand calculated in (C) above.
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- Assume that the Clothing brands J. and GulAhmed are two competing brands in Karachi. With the arrival of the winter season, GulAhmed announces a 30% discount on all products. Using ‘Comparative Statics Analysis’ of demand and supply model: a. Explain how the managements of the both brands will study the short-run and long-run impact on the sale of cloths, after the announcement of discount on all products in the Cloth market? b. Demonstrate and explain, with clearly labelled two panel diagrams, the ‘Rationing Function’ and the Allocating or ‘Guiding Function’ of Price.Assume two famous kurta brands; A1Suits selling kurtas made with natural pure cotton while K2Kaprey with polyester. An article is published giving advantages and recommendation of wearing pure cotton clothing material during a heat wave. What will be the short-run and the long-run impact of the research article? In support of your answer apply the comparative statics analysis, using clearly labelled two panel diagrams of demand and supply model, along-with brief explanations for: Short-run market changes due to ‘Rationing function of Price’. Long-run market analysis of ‘Guiding or Allocating function of Price’.Assume two famous kurta brands; A1Suits selling kurtas made with natural pure cotton while K2Kaprey with polyester. An article is published giving advantages and recommendation of wearing pure cotton clothing material during a heat wave. What will be the short-run and the long-run impact of the research article? In support of your answer apply the comparative statics analysis, using clearly labelled two panel diagrams of demand and supply model, along-with brief explanations for: a. Short-run market changes due to ‘Rationing function of Price’. b. Long-run market analysis of ‘Guiding or Allocating function of Price’.
- Consider the following general linear demand and supply functions that represent a market: Qd = Z −GP (3) Qs = D + EP+ CS (4) where P is the price, S is a variable denoting the average amount of production shipping costs, and Qd and Qs are the quantity demanded and the quantity supplied. Assume D, E, G, and Z all have values greater than zero. What equation (in addition to equations 3 & 4) completes our mathematical model of market equilibrium? Identify the parameters, endogenous variables, and exogenous variables in the above system of Derive expressions for the equilibrium market price (P∗) and quantity (Q∗) and illustrate your answers with a graph. Be sure to specify the symbolic values of the demand and supply curves where they intersect with the P-axis and Q-axis in the positive Given your…The coffee and tea demand functions depend on both prices. Suppose the demand curves for coffee and tea are Qc = 120 − 2pc + pt and Qt = 90 − 2pt + pc, where Qc is the quantity of coffee, Qt is the quantity of tea, pc is the price of coffee, and pt is the price of tea. These crops are grown in separate parts of the world, so their supply curves are not interrelated. We assume that the short-run, inelastic supply curves for coffee and tea are Qc = 45 and Qt = 30. Solve for the equilibrium prices and quantities. Now suppose that a freeze shifts the short-run supply curve of coffee to Qc = 30. How does the freeze affect the prices and quantitiesThe model of competitive markets relies on these three core assumptions: 1. There must be many buyers and sellers—a few players can't dominate the market. 2. Firms must produce an identical product—buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.
- The model of competitive markets relies on these three core assumptions: 1. There must be many buyers and sellers—a few players can't dominate the market. 2. Firms must produce an identical product—buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive? Two taxi companies serve most of the market in a big city. Consumers don't care which taxi company they take—if they decide it's worth taking a taxi, they flag down the nearest one. Dozens of companies…The model of competitive markets relies on these three core assumptions: 1. There must be many buyers and sellers—a few players can't dominate the market. 2. Firms must produce an identical product—buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive? There are hundreds of colleges that serve millions of students each year. The colleges vary by location, size, and educational quality, which enables students with diverse preferences to find schools that match…The model of competitive markets relies on these three core assumptions: 1. There must be many buyers and sellers—a few players can't dominate the market. 2. Firms must produce an identical product—buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive? A few major airlines account for the vast majority of air travel. Consumers view all airlines as providing basically the same service and will shop around for the lowest price. There are hundreds of…
- Volkswagen’s reputation among car buyers was shattered when the public discovered it was cheating on its emissions checks. What happened to equilibrium prices and quantities in the market for Audis, which is widely known to be a good substitute for Volkswagens also created in Germany? The equilibrium price Group of answer choices is ambiguous and the equilibrium quantity increases. increases and the equilibrium quantity increases. decreases and the equilibrium quantity increases. increases and the equilibrium quantity decreases.Given below are the demand and supply functions for three interdependent commodities. Qd1 = 90 – 2P1 + 3P2 – 5P3 ; Qs1 = P1 – 10 Qd2 = 36 + 3P1 – 3P2 + 2P3 ; Qs2 = –14 + P2 Qd3 = 45 – 3P1 + 3P2 – 3P3 ; Qs3 = P3 – 20 a. Determine the equilibrium prices and quantities for the three commodity Market model. b. Compute the price and cross elasticities of demand for all three markets and interpret their coefficients.Assuming you are the manager of the travel department of a large corporation and your sales department has high consumption for air travel. Assume further that the president of the corporation wants you to reduce the travel expenditures in the next year. How will you curb the air travel? Using Demand and Supply Analysis, how will you predict the airfare, given the following assumptions? A number of new, small airlines have recently entered the industry and others are expected to enter next year? Broadband internet videoconferencing is becoming a popular, cost-effective alternative to business travel for many corporations? The trend is expected to accelerate next year as telecommunications firms begin cutting prices on teleconferencing rates.