# Demand Estimation

Powerful Essays
5612 Words
Grammar
Plagiarism
Writing
Score
Demand Estimation
TUTORIAL 1: DEMAND THEORY

1a)

The demand curve for haircuts at Terry Bernard’s Hair Design is P = 15 – 0.15Q where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of RM9. Terry is unwilling to raise price of the price hike will cause revenue to fall. Should Terry raise the price of haircuts above RM9? Why or why not?

b)

Terry is trying to decide on the number of people to employ based on the following short-run production function:

Q = 12L – 0.5L2

Where Q is the number of cuts per week and L is the number of workers. Suppose the price of a haircut is RM9, how many people should be hired if she pays each worker RM60 per week.

2. Based on a consulting economist report, the demand function for Formula 1 stickers by two individuals, (assuming the market has only 2 individuals)

Q1 = 16 - 4P Q2 = 20 –2P respectively

a. What is the market demand curve equation? Write it in the conventional way. b. Given the total cost as TC = 2 + 0.9Q2. Calculate the profit maximizing quantity and price and the total profits. c. Draw a diagram showing the equilibrium situation in (b).

3. The market demand and supply functions for a consumer item are as follow:

Qd = 120 – 6P Qs = 20 +4P

a) Determine the equilibrium price and quantity. b) If the government sets a minimum price of \$12 per unit, how many units would be supplied and how many units would be demanded? c) If demand increases to : Qd’ = 200 – 6P, determine the new equilibrium price and quantity. d) Draw a figure showing equilibrium price and quantity as in part (a) and part (c).

4. Zaid’s Frozen Pizza have enjoyed rapid growth in West Malaysia. From the analysis, it was found that the demand curve follows this pattern

Q = 1,000 – 3,000P + 10A

Where,

Q = Quantity

## You May Also Find These Documents Helpful

• Good Essays

10. The intersection of supply and demand will be at a lower equilibrium price but a higher equilibrium quantity if…

• 1595 Words
• 7 Pages
Good Essays
• Good Essays

d. Assume the market price is currently \$2. What problem would occur in the market due to this price? Will it be shortage or surplus? What will its effect on the price? Indicate this on the supply and demand graph.…

• 1017 Words
• 6 Pages
Good Essays
• Satisfactory Essays

1.2 Analyze the effect of changes in supply and demand on the equilibrium price and quantity.…

• 1766 Words
• 8 Pages
Satisfactory Essays
• Good Essays

c. Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T.…

• 612 Words
• 3 Pages
Good Essays
• Satisfactory Essays

Measures the market value of all final goods and services produced in the U.S. in a given year…

• 563 Words
• 7 Pages
Satisfactory Essays
• Satisfactory Essays

Part B, the first step is to find the quantity demanded and quantity supplied need to be established in regards to prices provided.…

• 421 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

Problem Set 1 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 2.…

• 505 Words
• 4 Pages
Satisfactory Essays
• Satisfactory Essays

|(b.) (15 points) Now, suppose that following the supply and demand changes in (a), a substitute good goes up in price, and your costs of |…

• 1217 Words
• 5 Pages
Satisfactory Essays
• Good Essays

b) Identify the profit-maximizing rate of output in a situation where marginal cost is constant at \$0.20 a unit.…

• 477 Words
• 2 Pages
Good Essays
• Satisfactory Essays

## Ch 5

• 2451 Words
• 13 Pages

4. If the price elasticity of demand for a product is 3.0, then when its price falls from \$1.50 to \$1.25, the quantity…

• 2451 Words
• 13 Pages
Satisfactory Essays
• Satisfactory Essays

3. As the price of a good increases, the change in the quantity demanded can be shown by…

• 2048 Words
• 9 Pages
Satisfactory Essays
• Satisfactory Essays

1. Using Microsoft Excel, draw a graph illustrating the supply and demand in this market.…

• 337 Words
• 1 Page
Satisfactory Essays
• Powerful Essays

where Ps is the price suppliers receive and Pc is the price paid by consumers. The tax drives a wedge between the price consumers pay and the price suppliers receive, such that t = Pc – Ps. If we substitute Ps = Pc - t into the supply equation we obtain:…

• 1745 Words
• 7 Pages
Powerful Essays
• Satisfactory Essays

Problem Set 1 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 2.…

• 375 Words
• 3 Pages
Satisfactory Essays
• Better Essays

Price elasticity is -0.61 which means a 1% increase in price of the product causes quantity demanded to drop by 0.61%. So, the demand of the product is relatively inelastic. Therefore, increase in price may not have large impact on the customers.…

• 927 Words
• 4 Pages
Better Essays