Suppose the generic demand function of hypothetical commodity is given byWhere Q* is quantity demand of commodity, Y is income, Px is price of commodity, Py is priceof related goodGiven Y= 1500; Px = 3 and Py = 2a). calculate price elasticity of demand and interpret the result? b). calculate income elasticity and interpret the result?c). calculate cross-price elasticity and identify the nature of the good?2. Suppose Addis Ababa textile factory is facing the following production function with fixed supply of machineries (capital) and variable input (labor).Calculate the corresponding values of AP and MPDraw curves for TP, AP and MP of laborIdentify the three stages of production and show their tabular and graphical justifications.Indicate the point where the LDMR starts to operate.The inflexion pointGiven Cobb-Douglas production function Q = 50 KL, if a wage rate is 25 birr per labor and the rental capital is 50 birr per capital.Determine the optimum input combinations of labor and capital for producing 1000 unit of output?What is the minimum cost of production?If the output price is 40 birr, calculate the profit/loss of the firm? MachineriesLaborTPAPMPStage of production(in number)(in work-hour)101012.1010310412101410615107151014109.125.2.

In this question we have to find out the price elasticity of demand, income elasticity , cross-price…

Answered: Suppose the generic demand function of…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: Production And Costs

Section21.5: Production And Costs In The Long Run

Problem 1ST

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Suppose the generic demand function of hypothetical commodity is given by

Where Q^* is quantity demand of commodity, Y is income, P_x is price of commodity, P_y is price

of related good

Given Y= 1500; P_x = 3 and P_y = 2

a). calculate price elasticity of demand and interpret the result? b). calculate income elasticity and interpret the result?

c). calculate cross-price elasticity and identify the nature of the good?

2. Suppose Addis Ababa textile factory is facing the following production function with fixed supply of machineries (capital) and variable input (labor).

Calculate the corresponding values of AP and MP
Draw curves for TP, AP and MP of labor
Identify the three stages of production and show their tabular and graphical justifications.
Indicate the point where the LDMR starts to operate.
The inflexion point
Given Cobb-Douglas production function Q = 50 KL, if a wage rate is 25 birr per labor and the rental capital is 50 birr per capital.
1. Determine the optimum input combinations of labor and capital for producing 1000 unit of output?
2. What is the minimum cost of production?
3. If the output price is 40 birr, calculate the profit/loss of the firm?

Machineries
Labor
TP
AP
MP
Stage of production
(in number)
(in work-hour)
10
10
1
2.
10
10
3
10
4
12
10
14
10
6
15
10
7
15
10
14
10
9.
12
5.
2.

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