(a)
(a)
Explanation of Solution
Given information:
The marginal revenue product of flour is
Calculation:
The inverse
From the inverse demand equation, the demand equation of each individual baker can be derived as follows:
The demand equation for each individual baker is
To find the whole market demand for flour, multiply Equation (3) by 1,000. (Total number of producers).
The whole demand for the market for flour is
Demand: Demand is the quantity of goods and services that people are willing and able to buy at particular
(b)
Calculate the
(b)
Explanation of Solution
Given information:
The market supply function for flour is
Calculation:
The intersecting point of supply and demand is the equilibrium point. The corresponding price in the equilibrium point is the equilibrium price. Equate the market demand equation (Equation (4) derived in part (a)) and supply equation to calculate the equilibrium price of flour.
Equilibrium price is $24.
Equilibrium price: The equilibrium price is the market price determined by the interaction between the quantity demanded and the quantity supplied.
(c)
(c)
Explanation of Solution
Substitute the equilibrium price in the demand equation (Equation (3) derived in part (a)) to calculate the equilibrium quantity of flour demanded.
Equilibrium quantity is 3,600 units of flour.
Equilibrium quantity: The equilibrium quantity is the point where the quantity demanded is equal to the quantity supplied.
(d)
Total market quantity of flour demanded.
(d)
Explanation of Solution
Substitute the equilibrium price in the market demand equation (Equation (4) derived in part (a)) to calculate the market quantity.
Total market quantity of flour is 36, 00,000 units of flour; thus, each of 1000 bakers buy 3,600 units.
(a)
New market demand function of flour, new equilibrium price and quantity, and quantity of bread flour purchased by each baker.
(a)
Explanation of Solution
Given information:
The marginal revenue product of flour is
Calculation:
The inverse demand function is shown below.
From the new inverse demand equation, the demand equation for each individual baker can be derived as follows:
The new demand equation for each individual baker is
To find the whole market demand for flour, multiply Equation (7) by 1000.
The whole demand for the market is
The intersecting point of supply and demand is the equilibrium point. The corresponding price in the equilibrium point is the equilibrium price. Equate the market demand equation (Equation (7) and supply equation to calculate the new equilibrium price of flour.
New equilibrium price is $15.
Substitute the new equilibrium price in the new market demand equation (Equation (8) to calculate the new market quantity.
The new market quantity of flour is 2,250,000 units of flour; thus, each of 1000 bakers buy 2,250 units.
Demand: Demand is the quantity of goods and services that people are willing and able to buy at particular price in a given period of time.
Equilibrium price: The equilibrium price is the market price determined by the interaction between the quantity demanded and the quantity supplied.
Equilibrium quantity: The equilibrium quantity is the point where the quantity demanded is equal to the quantity supplied.
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Chapter 13 Solutions
Microeconomics
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