Is it possible that monopoly regulation through the establishment of a maximum price results in an increase in social welfare and generates the appearance of unsatisfied demand (excess demand)? Illustrate your answer with graphs and discuss them.
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- Taxicab fares in most cities are regulated. Several years ago, taxicab drivers in Boston obtained permission to raise their fares 10 percent, and the anticipated revenues would increase by about 10 percent as a result. They were disappointed, however, when the commissioner granted the 10% increase, revenues only increase about 5%. What can you infer about the elasticity of demand for taxi cab rides? What were taxicab drivers assuming about the elasticity of demand?Exercise 4.2 "With respect to the monopoly equilibrium without price discrimination, first-degree price discrimination increases the profit of the enterprise at the expense of reducing social welfare." Do you agree with this statement? Reason your answer and represent graphically.Elixir Springs, Inc., is an unregulated European natural monopoly that bottles Elixir, a unique health product with no substitutes. The total fixed cost incurred by Elixir Springs is €150,000,€150,000, and its marginal cost is 10 cents a bottle. The figure illustrates the demand for Elixir.a What is the price of a bottle of Elixir?b How many bottles does Elixir Springs sell?c Does Elixir Springs maximize total surplus or producer surplus?
- Demand for Nuts is given by Q = 50 – 2P. (Not that dQ/Dp= - 2) 1)Calculate the price elasticity of demand. 2)At what price-quantity combination is revenue from sales of nuts maximized? Why? Show your mathematical work. Illustrate by graphing total revenue. 3) A report published in Science magazine shows that eating nuts is correlated with high levels of blood cholesterol. How would this affect the demand for nuts? The revenue maximizing amount of nuts?Energy markets, such as the market for natural gas and electricity, have been known to be characterized by inelastic demand. However, recent research discussed in the August 25, 2022 issue of The Economist, indicates that while the responsiveness of quantity demanded in response to price changes indeed is “inelastic” (i.e., the absolute value of price elasticity of demand is still less than 1), the percentage change in quantity demanded in response to a change in price is much larger than earlier research indicated. Answer these narrative questions. No graphs are needed. What does “inelastic demand” formally mean? In addressing this part of the question, please make sure to explain the concept of the price elasticity of demand using a simple formula and by providing a short narrative. Policymakers are encouraging people to conserve energy in response to the growing energy crisis. Discuss the positives (pros) and negatives (cons) of providing subsidies to consumers in this situation…if the market demand for coffeis q=27-3p the market supply is given by q=-5+q at equilibrium ,the elasticity of the demand is
- Question 1.3 The demand function for a good isQ = 100 − 2p.What is the elasticity at the point p = 10 and Q = 80. (Use the definition = dQ/dp · p/q,where dQ/dp=-2).Given the demand function, P = A*Q^1/E; where p = price, q = quantity demanded, E = elasticity and , A = constant... How do I show E is constant? I tried to use the formula E = dQ/dP * P/Q, but ended up with the following. E = dQ/dP * P/Q or 1/E = dP/dQ * Q/P E = d[(P/A)^E]/dP * P/Q E = [(1/A^E)*(E*P^(E-1)] * P / (P/A)^E [NOTE: P/P = 1] E = (E)*(P^E-1) / (A^E) * A^E [Note: A^E/A^E = 1] E = E*P^E-1The supply and demand schedules for tickets to basketball games in town of Oakwood are given in the table below.Price Quantity DemandedQuantity Supplied$65,0002,00074,0002,00083,0002,00092,0002,000101,0002,000The stadium owners need to find the optimum price for the games.What are the coefficients of elasticity of supply and demand if the price is raised from $6 to $8?
- What is a sin tax? Should we tax sugary drink? Mention its relationship to elasticity.Joe initially charged $180 for a electronic product and averaged 20 clients per week. When he raised his price to $220, the number of sales decreased to 15 per week. What is the price elasticity of demand for his product? Majed initially charged $50/hr. for helping with practice questions and averaged 35 clients per week. When he raised his price to $75, the number of sessions increased to 40 per week. What is the price elasticity of demand for his services?Exercise A.2 Explain why monopoly means less social welfare. Is there any kind of price discrimination that does not generate loss of social welfare? Graphically represent the two situations.
