Problem one (from Farnham, 2014) The weekly demand for Kelewele among the 2014 cohorts of MBA students at the UGBS is Qd = 500-5P+0.51 +10P, 2P₂ X Where Qd is the quantity demanded of Kelewele Х Px is the price of Kelewele per lb I is consumer income in Ghana Cedis Py and P₂ are the prices of two goods that are related to Kelewele. a) Based on the demand function above, is Kelewele a normal good or an inferior good? Explain your answer. b) Based on the demand function above, what is the relationship between Kelewele and good Y? c) Based on the demand function above, what is the relationship between Kelewele and good Z? d) What is the equation of the demand curve if consumer incomes are GHS 30, the price of good Y is GHS 10 and the price of good Z is GHS 20? e) Graph the demand function for Kelemele from d) Now suppose the weekly supple function of Kelewele at the UGBS graduate campus is QS-210 + 20P - 5P₁ X X Where QS is the quantity supplied of Kelewele and P₁ is the price of inputs used in preparing Kelewele f) What is the supply function if input prices are GHS 10? g) Graph the supply curve from f). h) Compute the equilibrium price and quantity of Kelewele. Suppose authorities at UGBS are concerned that Kelewele sellers at UGBS are exploiting students by charging exorbitant price for their Kelelwele so they decree that no one should seller Kelewele above GHS 20 per lb. i) What type of price control measure is this? j) Following this decree, will there be excess demand or excess supply of Kelewele at UGBS? Calculate the excess demand or excess supply? k) To ensure that the price control measure stands, the authorities have to produce the excess demand or buy the excess supply in j) off the market. How much will this cost the Authorities?
Problem one (from Farnham, 2014) The weekly demand for Kelewele among the 2014 cohorts of MBA students at the UGBS is Qd = 500-5P+0.51 +10P, 2P₂ X Where Qd is the quantity demanded of Kelewele Х Px is the price of Kelewele per lb I is consumer income in Ghana Cedis Py and P₂ are the prices of two goods that are related to Kelewele. a) Based on the demand function above, is Kelewele a normal good or an inferior good? Explain your answer. b) Based on the demand function above, what is the relationship between Kelewele and good Y? c) Based on the demand function above, what is the relationship between Kelewele and good Z? d) What is the equation of the demand curve if consumer incomes are GHS 30, the price of good Y is GHS 10 and the price of good Z is GHS 20? e) Graph the demand function for Kelemele from d) Now suppose the weekly supple function of Kelewele at the UGBS graduate campus is QS-210 + 20P - 5P₁ X X Where QS is the quantity supplied of Kelewele and P₁ is the price of inputs used in preparing Kelewele f) What is the supply function if input prices are GHS 10? g) Graph the supply curve from f). h) Compute the equilibrium price and quantity of Kelewele. Suppose authorities at UGBS are concerned that Kelewele sellers at UGBS are exploiting students by charging exorbitant price for their Kelelwele so they decree that no one should seller Kelewele above GHS 20 per lb. i) What type of price control measure is this? j) Following this decree, will there be excess demand or excess supply of Kelewele at UGBS? Calculate the excess demand or excess supply? k) To ensure that the price control measure stands, the authorities have to produce the excess demand or buy the excess supply in j) off the market. How much will this cost the Authorities?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Problem one (from Farnham, 2014)
The weekly demand for Kelewele among the 2014 cohorts of MBA students at the UGBS
is
Qd = 500-5P+0.51 +10P, 2P₂
X
Where Qd is the quantity demanded of Kelewele
Х
Px is the price of Kelewele per lb
I is consumer income in Ghana Cedis
Py and P₂ are the prices of two goods that are related to Kelewele.
a) Based on the demand function above, is Kelewele a normal good or an inferior good?
Explain your answer.
b) Based on the demand function above, what is the relationship between Kelewele and
good Y?
c) Based on the demand function above, what is the relationship between Kelewele and
good Z?
d) What is the equation of the demand curve if consumer incomes are GHS 30, the price
of good Y is GHS 10 and the price of good Z is GHS 20?
e) Graph the demand function for Kelemele from d)
Transcribed Image Text:Now suppose the weekly supple function of Kelewele at the UGBS graduate campus is
QS-210 + 20P - 5P₁
X
X
Where QS is the quantity supplied of Kelewele and P₁ is the price of inputs used in
preparing Kelewele
f) What is the supply function if input prices are GHS 10?
g) Graph the supply curve from f).
h) Compute the equilibrium price and quantity of Kelewele.
Suppose authorities at UGBS are concerned that Kelewele sellers at UGBS are exploiting
students by charging exorbitant price for their Kelelwele so they decree that no one should
seller Kelewele above GHS 20 per lb.
i) What type of price control measure is this?
j) Following this decree, will there be excess demand or excess supply of Kelewele at
UGBS? Calculate the excess demand or excess supply?
k) To ensure that the price control measure stands, the authorities have to produce the
excess demand or buy the excess supply in j) off the market. How much will this cost the
Authorities?
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