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market demand

market demand

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. (Note: written in January 2017, fidget spinners were all the rage...) Suppose there are two groups in the economy who demand fidget spinners with the (inverse) aggregate demand for rapid spinners being P = 40 - 2 × QR where QR is the quantity demanded for all rapid spinners and the (inverse) aggregate demand for slow spinners being P = 20 – 2 × Q where is the quantity demanded for all slow spinners. a) Find the market demand function (note: be careful, there is a kink here). b) Suppose the (inverse) supply function for fidget spinners is P = 4+ 2 × QS. What is the equilibrium price and quantity here? Do both groups buy fidget spinners? c) Suppose the government feels that fidget spinners do an excellent job of reducing stress and want more people to have fidget spinners. This can be accomplished if the government subsidies them (a subsidy can be viewed/modelled as a negative tax). Suppose the government gives a $10 per fidget spinner subsidy to the producers, what is the new market price and quantity? How much does the (excise) subsidy cost the government?
Transcribed Image Text:2. (Note: written in January 2017, fidget spinners were all the rage...) Suppose there are two groups in the economy who demand fidget spinners with the (inverse) aggregate demand for rapid spinners being P = 40 - 2 × QR where QR is the quantity demanded for all rapid spinners and the (inverse) aggregate demand for slow spinners being P = 20 – 2 × Q where is the quantity demanded for all slow spinners. a) Find the market demand function (note: be careful, there is a kink here). b) Suppose the (inverse) supply function for fidget spinners is P = 4+ 2 × QS. What is the equilibrium price and quantity here? Do both groups buy fidget spinners? c) Suppose the government feels that fidget spinners do an excellent job of reducing stress and want more people to have fidget spinners. This can be accomplished if the government subsidies them (a subsidy can be viewed/modelled as a negative tax). Suppose the government gives a $10 per fidget spinner subsidy to the producers, what is the new market price and quantity? How much does the (excise) subsidy cost the government?
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