You do know that last year the market price was 10

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
for your product and do not wish to hire an economist to estimate one for you. You do know that last year, the market price was $10 and you sold 40,000 units of your good. This year, the price was $11 and you sold 30,000 of your good. Next year, you expect the market price to be $12. a. If you assume that your demand curve is approximately linear what is your estimate of the price elasticity of demand for your product? b. Again, assuming a linear demand curve, write an equation that would be your best guess of the demand curve for your product. How much do you expect to sell? c. If your demand curve is linear, how would you expect the elasticity of demand to differ next year (at a price of $12) compared to one year ago? (would it be larger, smaller, or the same?) Briefly explain your answer. 3. For each of the following production functions, write an expression for the marginal products of labor and capital, the average product of labor, and the marginal rate of technical substitution of labor for capital. Finally, state whether or not the technology behind each production function will result in isoquants that are convex to the origin. a. F(L,K) = 100L + 200K b. F(L,K) = 100LK -2K 2 c. F(L,K) = 5L 0.3 K 0.6 d. Does the production function given in part c exhibit constant, increasing, or decreasing returns to scale? Briefly explain.
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern