Question

email: Question 1: Define, using the relevant formula, price elasticity monopolist and you are of demand and oxplain its relationship with total revenue Asun.at-綁@ at 80 units of your output at the unit price of 405. Assume, moreover, that you know thal the price elastcity of demand is the mand wered n your sales and on your tiotal revenue af raising the unit price from 405 to 4857 What would be your ansmer Define income-elasticity of demand and its connection with the difference between normal and inferior goods Detine also the aross-lsticity of t with the difference between complementary Question 2: Explain, also by means of the appropriate graphic charge. Explain also why and how a monopolist should tpy to enforce Question 3: Explain the essence of break-even analysis, identilying, with a formula, appropriate graphical tools how firms set prices and output according to the break-even o but levet Expan moreover by usngne Andrews's model. Speaity also the notions of mark up and proflt margins and how Question 4 three years. Can you ae, uture value and IRR Motors is thinking about building a new factory. The factory cost (loday) is $385 miltion and the perspective yield i $420 mition in plain whether GM wil undertake the project ifthe interest rate is 4%, ta nortea etn ue te pe ein de eeeee Question 5: Explain, by using the notion of 'rent under what conditions a company the can ean extra profits in the long run. In your answer make neference to of B in the textbook the outcome in terms of price and output pairs of an hypothetical industry equation using the the form MR Then, use those equations to explain why under monopoly and perfect compettion the Question 6: The enclosed graph below, taken from your textbook, compares under duopoly with the outcomes of mropoly and perfect competion write the demand equation represented in te graph using reform p, and then output produced and the he price charged are those reported in the graph Price, Cost EY 100 Industry profit under duopoly 1800 (each frm receives E400) demand 30 40 60 100 Q graph below, taken from your textbook, shows the payoff matrix of two firms facing the altermative between values of the matrix come from,;(l) the notion of Nash Equilibrium; (ii) which of the four cells represent the Nash equillbrium following the Courmot strategy or a collusive agreement. The values reported in the matrix are consistent with those sown in the graph of question 6 above. Explain: ) Firm 2's output choices Q- 20 Q-15 Firm I's output choices , 375 -500

Answer 1

Ans 1. Definition : Price elasticity of demand is the degree of responsiveness of quantity demanded of a commodity in response to a change in its price.

ep =   percentage change in quantity demanded / percentage change in price , where e_p denotes price elasticity of demand.

If the demand is inelastic total revenue increases with the increase in price .

If there is elastic demand, total revenue falls with the increase in price.

Income elasticity of demand is defined as the degree of responsiveness of the quantity demanded of a commodity to a change in income. Income elasticity is Positive in case of Normal goods, i.e. with increase in income , the amount purchased of a commodity increases. In case of Inferior goods, income elasticity is Negative, i.e. increase in income leads to fall in purchase.

Cross elasticity of demand is defined as percentage change in quantity demanded of a commodity with respect to a change in the price of its related commodity. Cross elasticity of demand is Positive with substitutes and Negative with Complementary goods.