Please don’t answer subpart A. Subparts D, E, F correspond to question 3 in the 1st photo 3. Given the demand function of good 1: Q1Q1: the demand for good 1P1: the price for good 1P2: the price of good 2Answer the following questions= 300 10P1 + 0.5P2a. What is the inverse demand function of good 1?b. Derive the expression of total revenue in terms of quantity of good 1(Q1) and price oates) E v E v E E E三回三=|加vAaBbCcDdEeAaBbCcDdEeNormalBody Textd. If P2=2, what's the optimal quantity to produce for good 1? What's the correspondingprice to charge?e. If P1=3 and P2=2, what's the own price elasticity of good 1? Write out the formula,calculate and interpret.f. Are good 1 and good 2 complements or substitutes? Why?d States)רétv

Q = 300 - 10P1+0.5P2 10P1 = 300 + 0.5P2-Q P1 = 30 + 0.05P2 - 0.1Q The assumption we are assuming Cost = 8.5Q1 Optimum Output Condition MR = MC Let's Calculate TR First TR = (30 + 0.05*2 - 0.1Q)Q TR = (30 + 0.1 - 0.1Q)Q Now Calculate MR MR = 30 + 0.1 - 0.2Q PUT values in Optimal Condition we get MR = MC 30 + 0.1 - 0.2Q = 8.5 0.2 = 21.6 Q = 108 therefore Optimal Quantity is 108 P1 = 3 P2 = 2 Q = 300 - 10P1+0.5P2 Q = 300 - 10*3+0.5*2 Q = 300 - 30 + 1 Q = 271 Now Calculate elasticity Ed = ∂Q∂P1*P1QEd = -10*3271Ed = -0.11070 Ed = 0.11 tells that the own-price elasticity of demand is inelasticwe Know Q = 300 - 10P1+0.5P2 when P1 = 3 and P2 = 2 Q = 271 Now if price of P2 Increases from 2 to 4 Q = 300 - 10P1+0.5P2 Q = 300 - 10*3+0.5*4 Q = 300 - 30+2 Q = 272 Now we can see if price of 2 increases Quantity increases therefore these goods are substitute goods.

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3. Given the demand function of good 1: Q1 = 300 Q1: the demand for good 1 P1: the price for good 1 P2: the price of good 2 Answer the following questions – 10P1 + 0.5P2 %3D a. What is the inverse demand function of good 1?

3. Given the demand function of good 1: Q1 = 300 Q1: the demand for good 1 P1: the price for good 1 P2: the price of good 2 Answer the following questions – 10P1 + 0.5P2 %3D a. What is the inverse demand function of good 1?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 6PA: Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000)...

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Question

Please don’t answer subpart A. Subparts D, E, F correspond to question 3 in the 1st photo

E v E v E E E
三回三=|加v
AaBbCcDdEe
AaBbCcDdEe
Normal
Body Text
d. If P2=2, what's the optimal quantity to produce for good 1? What's the corresponding
price to charge?
e. If P1=3 and P2=2, what's the own price elasticity of good 1? Write out the formula,
calculate and interpret.
f. Are good 1 and good 2 complements or substitutes? Why?
d States)
ר
étv

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