This topic contains a solution. Click here to go to the answer

Author Question: Suppose the current price and quantity of widgets is p = 50 and Q = 125. The demand for widgets ... (Read 90 times)

notis

  • Hero Member
  • *****
  • Posts: 596
Suppose the current price and quantity of widgets is p = 50 and Q = 125.
 
  The demand for widgets is log-linear and the price elasticity of demand is E = -2. The supply of widgets is perfectly elastic.
  a. Derive the equations for the demand and supply of widgets.
  b. What would be the effect on the equilibrium price and quantity if demand were to increase by 500 widgets?

Question 2

The following table shows the relationship between output and number of workers in the short run. If the wage is 50/day, find marginal cost of production.
 
  Number of Workers Output
  0 0
  1 50
  2 110
  3 300
  4 450
  5 590
  6 665
  7 700
  8 725
  9 740
  10 735



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

tranoy

  • Sr. Member
  • ****
  • Posts: 344
Answer to Question 1

a. Because demand is log linear, the demand equation is of the form Q = Ape, where A is a positive constant and e is the price elasticity of demand. We can solve for A:
125 = A(50 )-2 A = 312,500
Demand is then given by Q = 312500p-2
Supply is horizontal and so the equation is p = 125.
b. An increase in demand will lead to Q = 313,000 and p = 125

Answer to Question 2

Number
of Workers Output MPL MC (=w/MPL)
0 0 -- --
1 50 50 1.00
2 110 60 0.91
3 300 190 0.26
4 450 150 0.33
5 590 140 0.36
6 665 75 0.67
7 700 35 1.43
8 725 25 2.00
9 740 15 3.33
10 735 -5 --




notis

  • Member
  • Posts: 596
Reply 2 on: Jul 1, 2018
Thanks for the timely response, appreciate it


adf223

  • Member
  • Posts: 304
Reply 3 on: Yesterday
Excellent

 

Did you know?

Thyroid conditions may make getting pregnant impossible.

Did you know?

In 1864, the first barbiturate (barbituric acid) was synthesized.

Did you know?

In 2006, a generic antinausea drug named ondansetron was approved. It is used to stop nausea and vomiting associated with surgery, chemotherapy, and radiation therapy.

Did you know?

In women, pharmacodynamic differences include increased sensitivity to (and increased effectiveness of) beta-blockers, opioids, selective serotonin reuptake inhibitors, and typical antipsychotics.

Did you know?

About one in five American adults and teenagers have had a genital herpes infection—and most of them don't know it. People with genital herpes have at least twice the risk of becoming infected with HIV if exposed to it than those people who do not have genital herpes.

For a complete list of videos, visit our video library