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# SI_562_Assignment_2_AnswerKey - p.107 3 E D =%Q 20 = 2.2 Q...

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p.107: 3. 2 . 2 % 20 % - = - = Q E D % 44 % + = Q 11. a. P Y Q 5 . 5 15 2000 - + = 150 euros; 15(000) euros P Y = = 1400 ) 150 ( 5 . 5 ) 15 ( 15 2000 = - + = Q ( 29 59 . 0 1400 150 5 . 5 - = - = D E b. ( 29 16 . 0 1400 15 15 = = Y E 23. a. 4500 ) 10 ( 50 5000 , 10 \$ = - = = Q P 4000 ) 20 ( 50 5000 , 20 \$ = - = = Q P 3500 ) 30 ( 50 5000 , 30 \$ = - = = Q P c. ( 29 111 . 0 4500 10 50 ) 10 \$ ( - = - = = P E D ( 29 250 . 0 4000 20 50 ) 20 \$ ( - = - = = P E D ( 29 429 . 0 3500 30 50 ) 30 \$ ( - = - = = P E D d. P Q D 50 5000 4250 - = = 15 \$ = P 27. If the price of DVD players declines by 20% and the total revenue from the sale of DVD players rises, this indicates that the demand for DVD players is price

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elastic. We cannot determine the impact of this price reduction on the firm’s profits without also knowing the cost function facing the firm. p.125: 1. a. budget constraint 4Q A + 6Q B = 48 b. Forming the unconstrained Lagrangian function: ) 48 6 4 ( 6 . 0 5 . 0 2 2 ) , , ( 2 2 - + - - + - + = B A B B A A B A B A Q Q Q Q Q Q Q Q Q Q L λ λ 0 4 2 = - + - = λ B A A Q Q Q L 0 6 2 . 1 2 = - - + = λ B A B Q Q Q L 0 48 6 4 = - + = B A Q Q L λ , c. First, we can represent A Q in terms of B Q , so B A Q Q 2 3 12 - = Plugging A Q into A Q L and B Q L we get the following: 0 4 ) 2 3 12 ( 2 = - + - - = λ B B A Q Q Q L 0 6 2 . 1 ) 2 3 12 ( 2 = - - - + = λ B B B Q Q Q L
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SI_562_Assignment_2_AnswerKey - p.107 3 E D =%Q 20 = 2.2 Q...

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