Log in
Economics
2
answers
1
watching
240
views

Suppose the competitive market for lunch set at local eateries can be represented by:

Demand: Q = 8500 – 2P3 Supply: Q = 500 + 6P3

  1. Find the market equilibrium price and quantity. (2 marks)

  2. Find the price elasticity of demand at equilibrium. Show your steps.

    (3 marks)

  3. Suppose, under the concern of public health, the government suddenly requires many eateries with unsatisfactory ventilation condition to close their business. As a result, the total sales volume of lunch set sold by local eateries changes by 20%.

    1. Based on your answer to (b), find the percentage change in the market price for lunch set. Does the price of lunch set rise or fall? Show your steps.

    2. How would the above government action affect the total revenue of the local eateries industry? Explain briefly.

      (5 marks)

Watch
2
answers
1
watching
240
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Suppose the market for copper is represented by Q = 5P2 - 200 Q = 1,300 - 10P2

a. Find the market equilibrium price and quantity. (2 marks)

b. Find the price elasticity of demand at the equilibrium. Show your steps. (3 marks)

c. Suppose there is a rise in the supply of copper in the market. Based on your result in (b), explain how the total sales revenue in the copper market will change.

Suppose the market for copper is represented by: Q = 5P2 - 200 Q = 1,300 - 10P2 a. Find the market equilibrium price and quantity. (2 marks) b. Find the price elasticity of demand at the equilibrium. Show your steps. (3 marks) c. Suppose there is a rise in the supply of copper in the market. Based on your result in (b), explain how the total sales revenue in the copper market will change.

Suppose that there are two firms competing in the market for taxi services. Big Ben Taxis has the marginal cost MCB = $9 per trip, and the fixed cost FCB = $3,000,000. While Whitehall Taxis has the marginal cost MCW = $15 per trip, and the fixed cost FCW = $1,000,000. Inverse demand for taxi trips in the market is given by the function, P = 75 − Q/10,000 . In this equation, P is the price of a taxi trip, and Q is the total quantity of taxi trips supplied by the two taxi companies.

Question 1: Find the equilibrium price and quantities for the case in which the two taxi companies engage in Cournot (quantity) competition. What profits will Big Ben Taxis and Whitehall Taxis earn. (11 Marks)

Question 2: Using your answers to question 1, determine which firm has the greater market power. (4 Marks)

Question 3: Now suppose that a firm can only supply taxi services if it purchases a licence from the government. What is the highest fee that the government can charge for a license, if the government wants both Big Ben Taxis and Whitehall Taxis to purchase a license? (Note: A licence does not place a limit on the number of taxi trips a company can supply. You should assume that both firms are charged the same fee.) (2 Marks) Question 4: If, instead, the government wants to maximise the revenue it receives from taxi license fees, how many licenses should it sell, and what fee should it charge? (8 Marks)

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in