MGE Notes answers Sep 13, 2017 .pdf

MGE Notes answers Sep 13, 2017 .pdf - General Supply...

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Unformatted text preview: General Supply Function: Q=h+kP+lPi+mPr+nT+rPe+sF Sign of Slope Parameter (is-‘9 uévtfil) Teoknolet‘i D.r¢a—"F n50 Exfoo'k-Oap rkg can"; ‘Pnu. \nqusn. m What happens to the supply of random access memory (RAM) chips, a component in the manufacture of personal computers, w en each of the following changes occurs? a) Two huge new manufacturing plants begin operation in South Korea. 5‘ 1‘ b) Scientists discover a new production technology that will lower the cost of making RAM chips. 5 T c) The price of silicon, a key ingredient in RAM chip production, rises sharply. S 4' d) The price of RAM chips increases. 3 :8 Ufif-Ko" “A , G $ 1‘ e) The fiat for personal computers turns sour and RAM chip makers now expect RAM chip prices to fall by 25 percent next quarter. 8 It The general demand function for good A is =75ar; —0.05M+6PB “0113313, +2N where Q: = quantity demanded of good A each month, PA = price of good A, M = average household income, Pa = price of related good 8,1: = a consumer taste index ranging in value from 0 to 10 (the highest rating), P5 = price consumers expect to pay next month for good A, and N = number of buyers in the market for good A. . + I ter ret the interce t arameter in the ene I d d f t' ‘ Mk ' u n ' 1 S a. n p p p g ra eman unc Ionfia 3 0‘ ”H . ‘9‘.“ b. What IS the value of the slope parameter for the price of good A? Does it have the correct algebraic sign? Why? 1.. - ‘2. \cw-J .4 J . ... .- .9 1h b c o c. Interpret the slope parameter for income. ls good A normal or- Explain. ¢ .. - , o g- d. Are goods A and B substitutes or complements? Explain. Interpret the slope parameter forthepriceofgoodB. dsb ab sttg ”Nah: e. Are the algebraic signs on the slope parameters for‘h', PE, and N correct? Explain. a. 9 g,“ ‘3 1‘. Calculate the quantity demanded of good A when PA: $2, M: $60,000, pa =$24,t— _ 7’ “ ' " ‘ V = $12, and N = 12,000. Gt“ . 1 r4 .74 7,3 -, o§ ( homage} c a. (2.4) I, \OC'I) + 3C ,1) r_____—-\ ¥2L|1,o~°) , 21,006 14,. .. U3 9‘ The following general supply function shows the quantity of good X that producers offer for sale (Q): Q: =478+4P—8£, +3.2T+12Pr —1.6}:+2F where P is the price of X, P, is the price of labor, Tis an index measuring the level of technology, P, is the price of a good R that is related in production, P9 is the expected future price of good X, and F is the number of firms in the industry. 0. Determine the equation of the supply curve for X when P]: $150, T: 10, PH — $60, Pe- — $75, and F: 15. Plot this supply curve on a graph. b. Suppose the price of labor Increases from $150 to $155. Find the equation of the new supply curve. Plot the new supply curve on a graph. C. Is the good related in production a complement or a substitute in production? Explain. d. What is the correct way to interpret each of the coefficients in the general supply function given above? Construct a graph showing equilibrium in the market for coffee. Label both axes and denote the initial equilibrium price and quantity as Po and On. For each of the following market events, draw an appropriate new supply and demand curve for coffee and predict the impact of the event on the market price and quantity sold in the new equilibrium. 3) a blight on coffee plants kills off much of the Brazilian crop b) coffee workers organize themselves into a union and gain higher wages c) coffee is shown to cause cancer in laboratory rats d) . price of tea declines e) coffee prices are expected to rise rapidly in the near future, ‘ Q9. The estimated demand for a good is Q=25—5P+0.32M+12Pn 3.5.,“ athflmg. 4 J t -*| C 0‘ where Q is the quantity demanded of the good, P is the price of the good, M is income, and P' Is the price of related good R. a) Are this good and related good R complement or sub__s___titutes? ?t¥ 1‘ a, 1‘ ‘1 5 b b) If' Income increases by $20,000, all else constant, Whappen to the quantity demanded? _%1(v3°,90°) - 040° 5Q Ali .31:- 3; .K13 30,990 GT :AePCsI-LI bx- mmsmé 3863 m .30 8:913 c263. 2.3? 253.0... «:23 So £935 a moon x 93 28:88 3a.. 8.. 3.0 A03“ m“”SwimummfinwianaTNw (:03 _v .0 5o 33 o“ x. 2 t 50 38 a .32. ._. mu m: .aaox 33253 So .93. 3 80:30.33 3 mm. 50 30¢ 02. noon 33$ .9 3.33 5 93:80:. womanzoOxanoagfio 38ng . man an .0 50 35302 2 «.35 .3 So .355. 5 0083350 303532350 253 0:20 qusso: 2: «Go. A... 3 Ed 30. mum 93 m n .8 ES 5.» 82% 220 o: m can: 0. ..s.4.~12u «92.7w. 995:1..3 L. rn 43 5.9“: a. :fiwio. 0.: .........._u S mcuuowwamhxnaagseasa .33 283 2mm. 32. 5o omega: 02... 3.2: 0:29? 0:20. 2390:2836 8.52.0083. Do a tvOO t +w N“... 031’ ,r‘\fav «a no u. 3 3 So noon 358g .3 28:30: m 832233 2. a 2.35:8 3 uaacaazq 06.22. 003$f0‘fpar. 9.)..P 5. VO . .. n—uibn on .40. ”NO ...
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