Suppose you are given the following supply and demand equations for your company's product, executive fountain pens: Qd = 12,000 - 2P + 3Py - 5Pn - 2Pk + 4M + 3A Qs = 8,000 + 4,000P - 7Pm - 3Pw where: Qd = quantity demanded of fountain pens Qs = quantity supplied of fountain pens P = price per unit of fountain pens Py = price per unit of pencils Pn = price per unit of notebooks Pk = price per bottle of ink M = consumer income A = number of units of advertising purchased by the company Pm = cost of purchasing materials (inputs) for fountain pens Pw = cost of hiring a worker (wage rate) a) given the signs of the coefficients in the demand equation, how does the demand for fountain pens react to each variable (i.e., substitutes, complements, normal good, inferior good)? b) given the signs of the coefficients in the supply equation, how does the supply for fountain pens react to each variable? c) suppose you are given the following data: Py = $10 Pn = $15 Pk = $8 M = $20,000 A = 1,000 units Pm = $2 Pw = $70 Calculate the equilibrium price and quantity for fountain pens. Round the quantity to the nearest whole number and the price to the nearest hundredth (i.e., dollars and cents ($xx.xx))
Suppose you are given the following
Qd = 12,000 - 2P + 3Py - 5Pn - 2Pk + 4M + 3A
Qs = 8,000 + 4,000P - 7Pm - 3Pw
where:
Qd = quantity demanded of fountain pens
Qs = quantity supplied of fountain pens
P = price per unit of fountain pens
Py = price per unit of pencils
Pn = price per unit of notebooks
Pk = price per bottle of ink
M = consumer income
A = number of units of advertising purchased by the company
Pm = cost of purchasing materials (inputs) for fountain pens
Pw = cost of hiring a worker (wage rate)
a) given the signs of the coefficients in the demand equation, how does the demand for fountain pens react to each variable (i.e., substitutes, complements, normal good, inferior good)?
b) given the signs of the coefficients in the supply equation, how does the supply for fountain pens react to each variable?
c) suppose you are given the following data:
Py = $10
Pn = $15
Pk = $8
M = $20,000
A = 1,000 units
Pm = $2
Pw = $70
Calculate the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
