Question

36.Assume a store sells good X and good Y. When the price of X was reduced from $18.00 to $10.00, the quantity of Y sold increased from 80 to 100. (a) Calculate the cross price elasticity of demand of X and Y. (b). Are the two goods substitute goods or complementary goods? Explain. (c). What does the coefficient of elasticity indicate?

37. Assume the following demand and supply equations: Qd: 182 - 50p Qs: 22 + 30p (a). Calculate the equilibrium price and quantity. (b). At price will there be a shortage and at what price will there be a surplus?

38. Assume the following inverted demand function of a firm in the short run: P = 50 - .5Q. Now assume the total cost function of this firm is : TC = 50 + 100Q - Q2 The above cost function yields the MC function as 100- 2Q (a). Calculate the profit maximizing price and output of this firm. (Hint: Obtain the MR first). (b). Is this firm earning a profit or loss in the short run? Explain. Is this firm earning a profit or incurring a loss? What is the amount of short-run profit or loss? Explain fully

Please type out answers for each question, because I can't read everyone handwriting please.

Answer 1

36) Cross price elasticity = percentage change in quantity / percentage change in price

= [100-80/(100+80/2)] / [10-18/(10+18/2)]

= [20/90] / [-8/14]

= [0.22222] / [-0.5714]

= -0.38

b) The two goods are complements as the cross price elasticity is negative

c) This indicates that when the price of x decreases by 1%, the quantity demanded of Y increases by 0.38%