A project requires signing buying 500 cubic yards of concrete per week for the next year from the only local provider. The currently price is $100 per yard and the provider sells 5,000 yards per week. Assuming marginal cost is constant, elasticity of demand at the current price is -1.5, and using a linear demand approximation, estimate the opportunity cost of the weekly government purchase. The METB is 0.2. Note you will need to find the original demand, the new demand, the new price, and the new quantity purchased by those other than the government in the process.
A project requires signing buying 500 cubic yards of concrete per week for the next year from the only local provider. The currently price is $100 per yard and the provider sells 5,000 yards per week. Assuming marginal cost is constant, elasticity of demand at the current price is -1.5, and using a linear demand approximation, estimate the opportunity cost of the weekly government purchase. The METB is 0.2. Note you will need to find the original demand, the new demand, the new price, and the new quantity purchased by those other than the government in the process.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A project requires signing buying 500 cubic yards of concrete per week for the next year from the only local provider. The currently
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