Question One. A market consists of 5000 identical households and 100 identical producers. The demand a. equation for a typical household over a week is given by = 30-2p + 0.001PCDI -0.028P Where i 1, 2, 3.5000 And the supply equation for a typical firm over a week I given by C = -50 + 10p - 0.5P,-0.1PE Where j 1,2,3....100 i. Write the market demand and supply equations ii. Assume a households' per capita disposable income PCDI is $8,000. Further assume that Pe, PL, and PE are $20, $100, and $80, respectively. Determine the market equilibrium price and quantity. iii. What would be the equilibrium price and quantity if the households' per capita income increased to $8,500, ceteris paribus? iv. Assume that due to inflation, the cost of labor increases by 30 % and price of energy by 40 %. What is the new market equilibrium price and quantity? Measur the impact of the change in prices of labor and energy by comparing the new equilibrium values with values (You will be doing comparative static analysis) (a) What is the weekly consumption of a household? V. (b) What is the weekly budget allocation of a household for this good? vi. Assume that producers collectively employ 1000 units of labor and use 500 ur of energy per week. Assuming no other production costs, what is the weekly
Question One. A market consists of 5000 identical households and 100 identical producers. The demand a. equation for a typical household over a week is given by = 30-2p + 0.001PCDI -0.028P Where i 1, 2, 3.5000 And the supply equation for a typical firm over a week I given by C = -50 + 10p - 0.5P,-0.1PE Where j 1,2,3....100 i. Write the market demand and supply equations ii. Assume a households' per capita disposable income PCDI is $8,000. Further assume that Pe, PL, and PE are $20, $100, and $80, respectively. Determine the market equilibrium price and quantity. iii. What would be the equilibrium price and quantity if the households' per capita income increased to $8,500, ceteris paribus? iv. Assume that due to inflation, the cost of labor increases by 30 % and price of energy by 40 %. What is the new market equilibrium price and quantity? Measur the impact of the change in prices of labor and energy by comparing the new equilibrium values with values (You will be doing comparative static analysis) (a) What is the weekly consumption of a household? V. (b) What is the weekly budget allocation of a household for this good? vi. Assume that producers collectively employ 1000 units of labor and use 500 ur of energy per week. Assuming no other production costs, what is the weekly
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.13P
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Transcribed Image Text:Question One.
A market consists of 5000 identical households and 100 identical producers. The demand
a.
equation for a typical household over a week is given by
C = 30 - 2p + 0.001PCD-0.028P. Where i 1, 2, 3..5000
And the supply equation for a typical firm over a week I given by
= -50 + 10p- 0.5PL-0.1P Where j 1,2,3...,100
i.
Write the market demand and supply equations
ii.
Assume a households' per capita disposable income PCDI is $8,000. Further
assume that Pe, PL, and PE are $20, $100, and $80, respectively. Determine the
market equilibrium price and quantity.
iii.
What would be the equilibrium price and quantity if the households' per capita
income increased to $8,500, ceteris paribus?
iv.
Assume that due to inflation, the cost of labor increases by 30 % and price of
energy by 40 %. What is the new market equilibrium price and quantity? Measure
the impact of the change in prices of labor and energy by comparing the new
equilibrium values with values (You will be doing comparative static analysis)
(a) What is the weekly consumption of a household?
V.
(b) What is the weekly budget allocation of a household for this good?
vi.
Assume that producers collectively employ 1000 units of labor and use 500 units
of energy per week. Assuming no other production costs, what is the weekly
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