Question

c) The demand function for books in Pick n Pay is given by P quantity demanded and P is the price per book. 50-0.3Q, where Q is the i. Find the number of books that will be bought when the price is K2. ii. iii. Find the price elasticity of the demand when the number of books bought is 30. ] Calculate the percentage change in quantity demanded when the price increases by 10% (use the coefficient price elasticity of demand in ii) above). 31 QUESTION 2 125 Marksl a) Mr. Musokotwane, a lawyer working for a large law firm and eaming $60,000 per year, is contemplating setting up his own law practice. He estimates that renting an office would cost 10,000 per year, hiring a legal secretary would cost $20,000 per year, renting the required office equipment would cost $15,000 per year, and purchasing the required supplies, paying foe electricity, telephone and so forth would cost another $3,000. The lawyer estimated that his total revenues for the year would be S100,000, and he is indifferent between keeping his present occupation with the large law firm and opening his own office. i. How much would be the explicit costs of the lawyer for running his own law office for ii. How much would be the accounting costs? iii Caleulate the implicit costs. iv. Find the economic costs. V. How much will the accounting profit be? vi. Calculate the economic profi vii. Should the lawyer go abead and start his own law fim? Question 1 |25 Marks] and Price(Kwacha) Quantity Demanded (units per week) b) Chiza is the owner of a fast food restaurant in Ndola. The average variable cost is $10 and the average fixed cost is S6. Assume that Chiza's shop is under perfectly competitive market. The price faced in the market is $8. i. Calculate the average total cost. . How much profivloss per unit is Chiza able to make in this business? ii Would you advice Chiza to quit the business in the short run? iv. If he decides to quit, how much will he lose in the short run per unit of output. How does this compare to the loss per unit if he continues in the business shot run? When does the firm working under perfect competition decide to shut down its short v. i. Plot the demand curve on a well-labelled graph. ii. Using your graph in (), distinguish between movements along and shifts in the QUESTION 3 125 Marksl iii. Mention the factors that are likely to cause shifts in the demand curve. iv. Calculate the price elasticity of demand at price $4 and at price si0 v. Estimate the elasticity between price of $6 and $8 vi. Suppose now that a rise in real income causes quantity demanded to increase by The marginal utilities of two goods X and Y that Tinta Inza consumes and the required a) S0units at every possible price, on the same graph in (i) plot the new demand curve. Is this a leftward or rightward shift in the demand curve? Explain your answer. 4 b) Suppose all of Chanda's weekly income is spent on two goods, X and Y. Draw Chanda's budget line if his income is S150 per week, the price of X is S10 per unit and the price of Y is S15 per unit. Draw the new budget line when either the following happens; 14 i. ii. iii. If the price of X doubles If the price of Y halves If Chanda's income rises to $300

Answer 1

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