Consumer theory

Suppose that you consume nothing but lemonade and pizza. In 1996, your income is $10 per week, lemonade costs $1 per bottle, and pizza costs $1 per slice. You buy 6 bottles of lemonade and 4 slices of pizza per week. In 1998, your income rises to $20 per week, the price of lemonade rises to $2.50 per bottle, and the price of ...continues

Consumer Economics

Suppose that you consume nothing but lemonade and pizza. In 1996, your income is $10 per week, lemonade costs $1 per bottle, and pizza costs $1 per slice. You buy 6 bottles of lemonade and 4 slices of pizza per week. In 1998, your income rises to $20 per week, the price of lemonade rises to $2.50 per bottle, and the price of piz ...continues

Solving the problem of busy signals

Dragon, Inc. is a large marketing company that sells recorded DVDs to phone-in customers. Demand for Dragon's products is running ahead of the firm's capacity to process orders so that customers are encountering busy signals when attempting to place telephone orders, and many customers are giving up. Dragon estimates that sale ...continues

Profit Maximization/Marginal Costs and Benefits

Graw Mc.Swill, a well-known book publisher, has just bought the rights to publish Billy Blood's latest book "The Microeconomics Massacre." Analysts have estimated the demand for this book to be X = 50,000 - 2,000P, where P stands for per-unit price, and X stands for number of books. Graw Mc.Swill?s cost function to produce the b ...continues

Perfect Competition and Surpluses

Assume that the market for labor is perfectly competitive, and that authorities institute the following policy: All workers should have health insurance, and the employer should pay for 100% of each worker's insurance policy (assume that the cost of the policy is the same for every worker). Use graphical and intuitive analysis t ...continues

Indifference curve and budget equation

The task is to use indifference curves and budget constraints to determine which of these two programs to chose. You are to assume that income is equal to $400 per month to spend on long-distance phone service and all other good (D) and that the utility function is U=mD. For each program, calculate the values of m and D that max ...continues

Elasticity

The demand for Penn's oil motor oil can be characterized by the following point elasticities: price elasticity=-2.5,cross-price elasticity with Value Lean motor oil = 1.5,and income elasticity=0.75. Indicate whether statement is true or false and explain your answer. A 0.9%price reduction for Penn's Oil would be necessary to ov ...continues

elasticity

The demand for Penn's Oil motor oil can be characterized by the following point elasticities: price elasticity= -2.5,cross-price elasticity w/Value Lean motor oil=1.5,income elasticity= 0.75.Indicate if statement is true or false and explain your answer. THE CROSS-PRICE ELASTICITY INDICATES THAT A 2% INCREASE IN THE PRICE OF VA ...continues

point price elasticity of demand

When P=$5 - $0.05Q, and Q =40, the point price elasticity of demand is: a. -2/3, b. -3/2, c. -8/3 d.-3/8. I know that when you plug 40 into the .05Q, you get 2, and 5-2=3, so I think the answer is b. but I can't figure out why. I would really appreciate an explanation. Thank you. Is this a slope, rise over run thing ...continues

Point Price Elasticity

If P1 =$5, Q1 =10,000, P2=$6 and Q2=5000, then at point P2 the point price elasticity Ep equals: a. -6 b. -2.5 c. -4.25 d. -0/12