Question

1.(32 pts. Consider the following equations describing the market for good X Demand: =4- Supply: -p-2 Equilibrium: q-q=9 a. Find the inverse domand and supply equations. (4 pts.) b. Algebraically find the equilibrium price (p) and quantity (q) of good X. (4 pies) c. Carefully and nearly draw the inverse supply and demand curves you found in purta. In constructing your graph, use the following values of : 0.2 and 4 i.e., coordinates (9), (2.__): (4. ): ctc.). Be sure to label your graph. (4 pts) ) d. At oquilibrium, what are total expenditures by demanders/consumers? What are total revenues received by sellers/firms? (4 pts.) c. Find the total dollar value of consumer surplus (CS) when the market is in equilibrium.(4 pts.) f. Find the total dollar value of producer surplus (PS) when the market is in equilibrium. (4 pts.) Suppose that a decline in consumers' taste for good X causes consumers to demand two fewer units of X at cach possible price. Everything else held constant, what is the new inverse demand equation? (Hint: it may help to sketch the graph of the new demand curve) (pis) h. Given your answer in question 4... what will be the new equilibrium price and quantity of X? (4 pts.)

Answer 1

As per the HOMEWORKLIB POLICY, answering the first four sub-parts.

a) qd, 4-2 » 1 2 = 4 - qd => P= 8- 290 : Inverse DD equation. QS = P-2 > PE qS +2 : Inverse SS equation. b. at equilibrium, qd = a iz 8-29= 2+2 3q=6 q*=2) [p* – 2+2=4 at que to, p=8 qd=2, p=4 q8=2, p=4 qd = "g p=0 q$= 4, p = 6 SS NW 11 au 2 3 4 d. Total Expenditure = p* x.q* = 8 - Total Revenue = f* * q* _ 8. ". e. C.= Area of AABC = **(8-4) x2 = 4 f P.S. = A reg of ABCD= X(4-2)^2 = 2 ::

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