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2009PS_4_Solutions

# 2009PS_4_Solutions - AEM 4150 Price Analysis Fall Semester...

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AEM 4150 Price Analysis Fall Semester 2009 Homework Assignment 4 Suggested Solutions Problem 1 (a) Demand Function (1 point) Qd = 29.81 – 1.78 P LP + 5.23 P Inkjet – 1.49 P Paper + 0.64 A + 2.11 I (b) Supply function (1 point) Qs = 3.78 + 2.33 P LP – 3.41 P Cartridge – 9.38 P Lab + 5.67 T (c) Equilibrium The goal of part 1 and 2 of this question is to put the demand and supply equation is such a form that we can solve for the equilibrium price and quantity. 1. We plug in the average values for all the variables except the price of laser printers and the quantity (1 point): Q LP = 29.81 – 1.78 P LP + 5.23 (80) – 1.49 (5.50)+ 0.64 (90.71) + 2.11 (41.25) Q LP = 29.81 – 1.78 P LP + 418.4 – 8.195 + 58.0544 + 87.0375 Q LP = 585.1069 – 1.78 P LP 2. Similarly, to find the intercept-price form of the supply equation, we plug in the average values for all the variables except the price of laser printers and the quantity (1 point): Q LP = 3.78 + 2.33 P LP – 3.41(60) – 9.38 (10.5) + 5.67 (19.96) Q LP = 3.78 + 2.33 P LP – 204.6 – 98.49 + 113.1732 Q LP = -186.1368 + 2.33 P LP 3. We find the equilibrium price by either equating quantity demanded with quantity supplied or

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2009PS_4_Solutions - AEM 4150 Price Analysis Fall Semester...

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