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Assignment 1

This document contains 13 assignment problems related to economics concepts such as demand and supply, costs of production, and elasticity. The problems involve deriving demand and supply schedules and curves from given demand and supply functions, calculating price elasticity of demand at different points, constructing cost schedules and analyzing costs of production, and analyzing production functions and costs for businesses.

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raheel
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76 views

Assignment 1

This document contains 13 assignment problems related to economics concepts such as demand and supply, costs of production, and elasticity. The problems involve deriving demand and supply schedules and curves from given demand and supply functions, calculating price elasticity of demand at different points, constructing cost schedules and analyzing costs of production, and analyzing production functions and costs for businesses.

Uploaded by

raheel
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Assignment 1

1. Suppose that (keeping everything else constant) the demand function of a commodity is given
by QD = 4400 - 6000P, where QD stands for the market quantity demanded of the commodity per
time period and P for the price of the commodity.
(a) Derive the market demand schedule for this commodity.
(b) Draw the market demand curve for this commodity.
2. Suppose that the demand function for the commodity in Problem 1 changes to QS = 65000 –
1200P.
(a) Define the new market demand schedule for the commodity.
(b) Draw the new market demand curve on a figure identical to that in Problem 1
(c) What are the new equilibrium prices and quantity for this commodity?
3. From the demand function QDx = 12 - 2Px (Px is given in dollars), derive
(a) the individual’s demand schedule and
(b) the individual’s demand curve,
(c) What is the maximum quantity this individual will ever demand of commodity X per time
period?
4. There are 12,000 identical individuals in the market for commodity X, each with a demand
function given by QDx = 12 - 2Px , and 870 identical producers of commodity X, each with a
function given by QSx =20 Px (see Problem 2.12).
(a) Find the market demand function and the market supply function for commodity X.
(b) Find the market demand schedule and the market supply schedule of commodity X and from
them find the equilibrium price and the equilibrium quantity.
(c) Plot, on one set of axes, the market demand curve and the market supply curve for commodity
X and show the equilibrium point.
(d) Obtain the equilibrium price and the equilibrium quantity mathematically.
5. For the market demand schedule in Table 1,
(a) find the price elasticity of demand for a movement from point B to point D, from point D to
point B, and at the point midway between point B and point D.
(b) Do the same for points D and G.

Table 1
6. Given the market demand schedule in Table 2 and the market demand curve in Fig.1, find e for
a movement from point C to point F, from F to C and midway between C and F, as follows:
Figure :1 Table: 2

7. For the market demand schedule in Table 2,


(a) find the price elasticity of demand for a movement from point A to point C, from point C to
point A and midway between A and C
(b) do the same for points F and H.
8. Suppose that two prices and their corresponding quantities (Table 3.14) are observed in the
market for commodity X. (Frequently in the real world data can be obtained for only a few prices
and quantities.
(a) Find the price elasticity of demand for commodity X between point A and point B.
(b) What can be said about the shape of Dx between point A and B?
9. From the TUy schedule in Table 4.7
(a) derive the MUy schedule, and
(b)plot the TUy and the MUy schedules and indicate the saturation point.

10. Consider the following cost information for a pizzeria:

a. What is the pizzeria’s fixed cost?


b. Construct a table in which you calculate the marginal cost per dozen pizzas using the
information on total cost. Also, calculate the marginal cost per dozen pizzas using the
information on variable cost. What is the relationship between these sets of numbers? Comment.

11. Your cousin Vinnie owns a painting company with fixed costs of $200 and the following
schedule for variable costs: Calculate average fixed cost, average variable cost, and average total
cost for each quantity. What is the efficient scale of the painting company?

12. Jane’s Juice Bar has the following cost schedules:


a. Calculate the average variable cost, average total cost, and marginal cost for each quantity.
b. Graph all three curves. What is the relationship between the marginal-cost curve and the
average-total-cost curve? Between the marginal-cost curve and the average-variable-cost curve?
Explain.

13. Nimbus, Inc., makes brooms and then sells them door- to-door. Here is the relationship
between the number of workers and Nimbus’s output in a given day:
a. Fill in the column of marginal products. What pattern do you see? How might you explain it?
b. A worker costs $100 a day, and the firm has fixed costs of $200. Use this information to fill in
the column for the total cost.
c. Fill in the column for the average total cost. (Recall that ATC=TC/Q.) What pattern do you
see?

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