G,H Calc and Interp indiv and agg D, and inverse D and S functions, and intep indiv and agg D and S curves+excess D or S associated w/ a non-equilibria P

Question 1

Determine the equilibrium price by setting the functions equal to each other and solving for P

Answer 1

Set Qs=Qd

Question 2

Calculate the Qd as Qd = 2000 - 125 (P)

Answer 2

Individual demandQd=B-P-Pc+Ps+I+A(advertising)

Then we can find a shortage (excess demand) or surplus (excess supply) by setting Qd = Qs again!

This is to calc excess demand or excess supply associated w/ a non-equilibrium price

Inverse demand : P=1/2(b)-Q-Pc+Ps+I+A

Given an individual’s demand function for Good X, QDX = f (price of Good X, price of Good A, price of Good B, income), we can insert values for income and the prices of related goods A and B to get quantity demanded as a function of only the price of Good X. We can invert this function (solve for PX) to get a demand curve (i.e., price as a function of quantity demanded).

Question 3

Calculate the Qs as Qs = -400 + 75 (P)

Answer 3

then find excess or shortgage as Qd = Qs

This is to calc excess demand or excess supply associated w/ a non-equilibrium price

Given a firm’s supply function for Good X, QSX = f (price of Good X, price of input A, price of input B) for a specific production technology, we can insert values for input prices to get quantity supplied as a function of only the price of Good X. We can invert this function (solve for PX) to get a supply curve (i.e., price as a function of quantity supplied).

Question 4

Calc and Interp Consumer Surplus

Answer 4

Consumers willingness to pay - Actual cost of the good Qd>Qs

Question 5

Calc and Interp Producer Surplus

Answer 5

Producer surplus or PROFIT is the difference between TC (area between MC and Q) and TR (P*Q)

Qs > Qd

Question 6

The supply curve for a good**

Answer 6

If quantity supplied = –28 + 7 × price, the slope of the supply curve is:

The supply curve for the good is determined by inverting the given supply function, which results in: price = 1/7 × quantity supplied + 4. The slope of this curve is 1/7.

Question 7

Aggregate Demand and Supply Curves

Answer 7

The aggregate or market demand (supply) function is calculated by summing the quantities demanded (supplied) for individual demand (supply) functions. Inverting an aggregate demand (supply) function produces an aggregate demand (supply) curve.

Question 8

The market for radios consists of 100 consumers, each of whom has the demand function:

QDradio = 4 − 0.4 Pradio + 0.0025 Income + 0.25 Pnewspaper − 0.005 Pbatteries
At current average prices, a radio costs £10, a newspaper costs £1, and batteries cost £2. Average income is £1,000. The market demand curve for radios is most accurately described as: 674 − 40 Pradio.

Answer 8

Aggregating the individual demand functions into the market demand function we get:

QDradio = 100(4 − 0.4 Pradio + 0.0025 Income + 0.25 Pnewspaper − 0.005 Pbatteries)

QDradio = 400 − 40 Pradio + 0.25 Income + 25 Pnewspaper − 0.5 Pbatteries

Substituting average values for all variables except price we get:

QDradio = 400 − 40 Pradio + 0.25(1,000) + 25(1) − 0.5(2)

QDradio = 400 − 40 Pradio + 250 + 25 − 1

QDradio = 674 − 40 Pradio

40 Pradio = 674 − QDradio

Solving for price gives us the demand curve:

Pradio = 16.85 − 0.025 QDradio

Question 9

Twenty firms in a region’s gravel market have identical supply functions of QS = −2,000 + 25P. The market supply curve (inverse supply function) is: P = 0.002QS + 80

Answer 9

The aggregate supply function is:
QS = 20(−2,000) + 20(25)P
QS = −40,000 + 500P

The market supply curve (inverse supply function) is:
500P = QS + 40,000
P = (1 / 500)QS + (40,000 / 500)
P = 0.002QS + 80

Question 10

If quantity supplied = –28 + 7 × price, the slope of the supply curve is:

Answer 10

The supply curve for the good is determined by inverting the given supply function, which results in: price = 1/7 × quantity supplied + 4. The slope of this curve is 1/7.

Question 11

Calculate and interpret the amount of excess demand or the amount of excess supply associated with a non-equilibrium price

Answer 11

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