ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423548
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 5, Problem 2.4PA
To determine

The reason for a greater price elasticity of demand for coca cola in comparison to other soft drinks.

Concept Introduction:

Price Elasticity of Demand: It is the degree of responsiveness to change in quantity demanded due to change in price level.

The formula for measuring elasticity of demand is given as follows:

  e=ΔQΔP× [ P 1+  P 22 Q 1+  Q 22]

Where,

   ΔQ=Q2Q1

   ΔP=P2P1

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19. (20 points in total) Suppose that the market demand curve is p = 80 - 8Qd, where p is the price per unit and Qd is the number of units demanded per week, and the market supply curve is p = 5+7Qs, where Q5 is the quantity supplied per week. a. b. C. d. e. Calculate the equilibrium price and quantity for a competitive market in which there is no market failure. Draw a diagram that includes the demand and supply curves, the values of the vertical- axis intercepts, and the competitive equilibrium quantity and price. Label the curves, axes and areas. Calculate both the marginal willingness to pay and the total willingness to pay for the equilibrium quantity. Calculate both the marginal cost of the equilibrium quantity and variable cost of producing the equilibrium quantity. Calculate the total surplus. How is the value of total surplus related to your calculations in parts c and d?
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