MANAGERIAL ECONOMICS PROBLEMS

MANAGERIAL ECONOMICS PROBLEMS

Problem #1

The X-Corporation produces a good (called X) that is a normal good. Its
competitor, Y-Corp., makes a substitute good that it markets under the
name “Y.” Good Y is an inferior good.

How will the demand for good X change if consumer incomes increase?

How will the demand for good Y change if consumer incomes decrease?

How will the demand for good X change if the price of good Y decreases?

Is good Y a lower-quality product than good X? Explain.

Problem #2

Good X is produced in a competitive market using input A. Explain what
would happen to the supply of Good X in each of the following
situations:

The price of input A increases.

An exercise tax of $1 is imposed on good X

An ad valorem tax of 5 percent is imposed on good X

A technological change reduces the cost of producing additional units of
good X.

Problem #4

The demand for good X is given by:

Qdx = 1,200 – Ѕ Px + ј Py – 8Pz + 1/10 M

Research shows that the prices of related goods are given by Py =$5,900
and Pz = $90, while the average income of individuals consuming this
product is M = $55,000.

Indicate whether goods Y and Z are substitutes or complements for good
X.

Is X an inferior or a normal good?

How many units of good X will be purchased when Px = $4,910?

Determine the demand function and inverse demand function for good X.
Graph the demand curve for good X.