University of Professional Studies, Accra (UPSA) was founded in 1965 as a private professional business education tuition provider. In 1999, by means of the Institute of Professional Studies Act, (Act 566), it became a tertiary institution with the mandate to provide tertiary and professional education in Accountancy, Management and related disciplines. The school has a student population of approximately 12,000. The school now have a state-of-the- art Students’ Center where food, snacks and drinks are served to students and staff. Nevertheless, a sizeable number of UPSA students patronize Auntie Ama’s (ATM) rice and beans food located at Madina Estate close to the Home-Made restaurant. In a quest to be able to predict the packs of rice Auntie Ama can sell in a month, she employed an economist to estimate the demand curve for her food. By sampling a total of 28 consumers, the economist estimated the demand function for Auntie Ama’s food as: Qxd= -175 – 1.5Px + 2.25Py + 0.5I + 0.75A Where Qxd is demand for Auntie Ama’s food, Px is the price per pack of Auntie Ama’s food, Pyis the price per pack of Home-Made food, I is per capita income of UPSA community, and A is the amount of money spent on advertising by Auntie Ama. In addition, the economist also estimated the supply function for Auntie Ama’s food as: Qxs = -25 + 3.5Px – 1.75PL + 0.25Tx Where Qxs is the supply of Auntie Ama.’s food, Px is the price per pack of Auntie Ama’s food, PL is the average price of unskilled labor (¢ per hour), and Tx is the level of Technology. Now suppose the equilibrium values of the variables in the demand and supply functions are given as: Px= ¢18; Py= ¢20; I=¢400; A=¢20; PL=¢10; Tx=¢30 Represent the demand curve, old and new supply curves on one graph and estimate the deadweight loss from tax What type of good is Auntie Ama’s food to consumers? What is the relationship between Auntie Ama’s food and Home-Made food?
University of Professional Studies, Accra (UPSA) was founded in 1965 as a private professional business education tuition provider. In 1999, by means of the Institute of Professional Studies Act, (Act 566), it became a tertiary institution with the mandate to provide tertiary and professional education in
Qxd= -175 – 1.5Px + 2.25Py + 0.5I + 0.75A
Where Qxd is demand for Auntie Ama’s food, Px is the
Qxs = -25 + 3.5Px – 1.75PL + 0.25Tx
Where Qxs is the supply of Auntie Ama.’s food, Px is the price per pack of Auntie Ama’s food, PL is the average price of unskilled labor (¢ per hour), and Tx is the level of Technology. Now suppose the equilibrium values of the variables in the demand and supply functions are given as:
Px= ¢18; Py= ¢20; I=¢400; A=¢20; PL=¢10; Tx=¢30
- Represent the demand curve, old and new supply curves on one graph and estimate the
deadweight loss from tax - What type of good is Auntie Ama’s food to consumers?
- What is the relationship between Auntie Ama’s food and Home-Made food?
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