University of Professional Studies, Accra (UPSA) was founded in 1965 as a private professional business education tuition provider. In 1999, by means of the Institute of Professional Studies Act, (Act 566), it became a tertiary institution with the mandate to provide tertiary and professional education in Accountancy, Management and related disciplines. The school has a student population of approximately 12,000. The school now have a state-of-the-art Students' Center where food, snacks and drinks are served to students and staff. Nevertheless, a sizeable number of UPSA students patronize Auntie Ama's (ATM) rice and beans food located at Madina Estate close to the Home-Made restaurant. In a quest to be able to predict the packs of rice Auntie Ama can sell in a month, she employed an economist to estimate the demand curve for her food. By sampling a total of 28 consumers, the economist estimated the demand function for Auntie Ama's food as: Qg = —175 — 1.5P, + 2.25Py + 0.51 + 0.75A Where Qg is the demand for Auntie Ama's food, P, is the price per pack of Auntie Ama's food, Py is the price per pack of Home-Made food, I is per capita income of UPSA community, and A is the amount of money spent on advertising by Auntie Ama. In addition, the economist also estimated the supply function for Auntie Ama's food as: Q: = —25 + 3.5P, — 1.75PL + 0.25T, Where (g is the supply for Auntie Ama's food, P, is the price per pack of Auntie Ama's food, P is the average price of unskilled labor (C per hour), and Tx is the level of technology. Now suppose the equilibrium values of the variables in the demand and supply functions are given as: P, = 08; Py = C20; / = C400; A = 420; PL= 410; TX=30 Determine the quantity of packs of food sold. Find the demand and supply curves for Auntie Ama's food. Determine the equilibrium price and quantity for Auntie Ama's food and show the equilibrium graphically.
University of Professional Studies, Accra (UPSA) was founded in 1965 as a private professional business education tuition provider. In 1999, by means of the Institute of Professional Studies Act, (Act 566), it became a tertiary institution with the mandate to provide tertiary and professional education in
Qg = —175 — 1.5P, + 2.25Py + 0.51 + 0.75A
Where Qg is the demand for Auntie Ama's food, P, is the price per pack of Auntie Ama's food, Py is the price per pack of Home-Made food, I is per capita income of
UPSA community, and A is the amount of money spent on advertising by Auntie Ama. In addition, the economist also estimated the supply function for Auntie Ama's food as:
Q: = —25 + 3.5P, — 1.75PL + 0.25T,
Where (g is the supply for Auntie Ama's food, P, is the price per pack of Auntie Ama's food, P is the average price of unskilled labor (C per hour), and Tx is the level of technology. Now suppose the equilibrium values of the variables in the demand and supply functions are given as:
P, = 08; Py = C20; / = C400; A = 420; PL= 410; TX=30
- Determine the quantity of packs of food sold.
- Find the demand and supply curves for Auntie Ama's food.
- Determine the equilibrium price and quantity for Auntie Ama's food and show the equilibrium graphically.
- Examine the welfares of the economic agents.
- Suppose a lump sum tax of C4 is imposed by the Management of UPSA, estimate the new equilibrium price and quantity.
- Represent the demand curve, old and new supply curves on one graph and estimate the
deadweight loss from tax. - What type of good is Auntie's food to consumers?
What is the relationship between Auntie Ama's food and Home-Made food
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