# 525 Homework 1 1

**Topics:**Supply and demand, Consumer theory, Inferior good

**Pages:**3 (694 words)

**Published:**April 20, 2015

a. What are her accounting profits?

25*8,000=$200,000

200,000-30,000=$170,000

b. What are her economic profits?

25*8,000=$200,000

200,000-30,000-110,000-80,000=-$20,000

2.The demand for good X is given by Qdx = 6,000-1/2Px-Py+9Pz+1/10M Research shows that the prices of related goods are given by Py = $6,500 and Pz = $100, while the average income of individuals consuming this product is M=$70,000. a) Indicate whether goods Y and Z are substitutes or complements for good X. If raise to $7,000,

=6000-*14,800-7,000+9*100+*70,000=-500

goes down, so X and Y are complements.

If raise to $150,

=6000-*14,800-6,500+9*150+*70,000=450

goes up, so X and Z are substitutes.

b) Is X an inferior or a normal good?

If income raise to $80,000

=*14,800-6,500+9*100+*80,000=1000

goes up, so X is a normal good.

c) How many units of good X will be purchased when Px = $5,230? =*5,230-6,500+9*100+*70,000=4,785

d) Determine the demand function and inverse demand function for good X. Graph the demand curve for good X. For the given income and the price of goods, the demand function for good X is -6,500+9*100+*70,000, which simplifies to, to find the inverse demand equation, solve for price to obtain , then we can get two point in the curve they are (0, 7,400) and (14,800, 0).

3.Suppose demand and supply are given by

Qdx=14-1/2Px and Qsx=1/4Px-1

a) Determine the equilibrium price and quantity. Show the equilibrium graphically. The equilibrium price is $20 and equilibrium quantity is 4

1200 giveid can be a Giffen Gnd the tax rate is $12 per unit, the total tax revenue is...

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