Microeconomic Principles Assignment - Demand and Supply for Widgets:
STEP 1:
- Write YOUR demand equation: Pb = 10A - 0.5BQd.
- Write YOUR supply equation: Pv = C + 0.5DQv
STEP 2:
Use the equilibrium definition and set:
Pb = P* = Pv and set Qb = Q* = Qv
Substitute P* in your demand equation for the right-hand side of your supply equation.
C + 0.5DQ* = 10A - 0.5BQ*
Solve for the equilibrium quantity Q*.
Substitute the value for Q* into the demand equation to find P*.
1. What is your student number-don't include the @?
2. What is your A?
3. What is your B?
4. What is your C?
5. What is your D?
6. What is your equilibrium price?
7. What is your equilibrium quantity?
8. How much do consumers spend in equilibrium?
9. How much revenue do producers receive in equilibrium?
10. How much consumer surplus is created by this market?
11. How much producer surplus is created by this market?
12. How much total surplus is created by this market?
STEP 3:
Take your equilibrium quantity and multiply it by 1.2-this is QH
Take your equilibrium quantity and multiply it by 0.8-this is QL
13. What is the marginal willingness to pay of the consumer that buys the QHth unit?
14. What is the marginal cost to the producer who makes the QHth unit?
15. How much surplus would be created by trading the QHth unit?
16. What is the marginal willingness to pay of the consumer that buys the QLth unit?
17. What is the marginal cost to the producer who makes the QLth unit?
18. How much surplus would be created by trading the QLth unit?
19. What is the limit-price for widgets?
20. What is the elasticity of demand for widgets between the equilibrium and limit prices?
21. What is the reservation price for widgets?
22. What is the elasticity of supply between the reservation and equilibrium prices?
23. Is the last digit of your student number (i.e., D) even or odd? If D is even, right the number 2 in your answer form. If not, write 3.
24. If D is even, suppose widgets are a normal good. If D is odd, suppose widgets are an inferior good. How would an increase in income affect the limit-price of widgets? 1 = increase, 2 = decrease, 3 = stays the same, 4 = ambiguous, 5 = no answer.
25. If D is even, suppose Bogs are a substitute for widgets. If D is odd, suppose Bogs are a complement for widgets. How would an increase in the price of Bogs affect the limit price for widgets? 1 = increase, 2 = decrease, 3 = stays the same, 4 = ambiguous, 5 = no answer.
Suppose the demand for widgets stays the same, but a decrease in the cost of production caused by a fall in the price "gets" causes an increase in the supply of widgets. The new supply is Pv = 0.5C + 0.5DQv.
26. What is the new equilibrium price of widgets?
27. What is the new equilibrium quantity of widgets?
28. What is the new total surplus in the market for widgets?
Suppose there is a quota, which restricts the production of widgets to Qmax = 0.5Q*; use the original supply equation.
29. What is the change in consumer surplus from the quota compared to the equilibrium?
30. What is the change in producer surplus from the quota compared to the equilibrium?
31. What is the change in total surplus from the quota compared to the equilibrium?
32. What is the dead-weight loss from the quota?
Suppose there is a tax on widgets. The tax is equal to 30% of the equilibrium price P**; use the original supply equation.
33. How much is the tax?
34. What is the after-tax quantity traded QT?
35. What is the consumer tax burden?
36. What is the producer tax burden?
37. What is the dead-weight loss of the tax?
38. What is producer surplus at QT?
39. What is consumer surplus at QT?
40. How much revenue is raised by the tax?