read the pdf and answer the questions (typed)

Requirements: typed

Homework 1

Instructions: Homework is due on November 3, 2023 at 9am.

You should submit your homework via Gradescope. Please start each problem on a new page and identify in Gradescope which page each problem is on. If you are working in a group of up to 3, make sure to list all group members.

10 points. Kitchenaid estimates demand for its new smart dishwasher is 300,000-200P.

What is the elasticity of demand at p=500? Show your calculations.

What is the elasticity of demand at p=1000? Show your calculations.

15 points. A major cable provider randomized the price that it showed for Jurassic World Dominion. It showed equal numbers of customers the prices $6, $7 and $8 to watch the movie on demand. 9,000 purchased the movie at $6, 8,000 purchased it at $7, and 7,000 customers purchased the movie at $8.

Plot demand at each price and calculate total revenue.

Write the expression for the linear demand curve.

What is the revenue-maximizing price? (Note: the revenue-maximizing price does not need to be $6, $7, or $8.)

15 points. In recent pilot analyses in different markets, an international firm found that increasing price by 10% reduced consumption of its product by 14.5%. By looking across higher and lower income markets, it also found that increasing income by 10% decreased consumption of its product by 2.3%.

What is the price elasticity of demand (numerical answer)?

At the original price, is the elasticity of demand elastic or inelastic? Explain why it is elastic or inelastic.

If the firm’s goal is to maximize revenue from its product, what should it do?

What is the income elasticity of demand (numerical answer)?

Based on the income elasticity you calculated, what type of good is its product?

10 points. Below are minimum prices for auctions of a rare penny on Ebay. Assume all the pennies are identical, each seller sells one, and that all the sellers offer free shipping. Draw the supply curve for the penny given the information presented below.

Seller 1: 45.00

Seller 2: 70.00

Seller 3: 55.00

Seller 4: 60.00

Seller 5: 80.00

Seller 6: 50.00

15 points. Suppose you’re analyzing the gasoline market. Currently, the equilibrium price is $2.50 per gallon, and the equilibrium quantity is 10,000 gallons per day. Analyze the impact of each event on equilibrium price and quantity.

Increase in Consumer Income: Consumer incomes in the region increase significantly.

Technological Advancement: A new technology reduces gasoline production costs.

Government Subsidy: The government provides a subsidy to gasoline producers, lowering their costs.

20 points. Here are the supply and demand equations for a Smart Pet Feeder, where p is the price in dollars:

D(p) = 9900 – 70p

S(p) = 20p

Draw and label the demand and supply curves for Smart Pet Feeders and find the equilibrium price and quantity of Smart Pet Feeders.

Suppose that the government decides to restrict the industry to selling the feeders at a price no more than $80. From the demanders’ perspective: How many feeders would be demanded? From the suppliers’ perspective: What is the maximum quantity of feeders that suppliers will provide?

Calculate the mismatch quantity supplied and demanded caused by the government’s restriction, and show it in the graph you drew.

The government decides to increase the maximum price from $80 to $150. Is this new price binding? Explain your answer.

15 points. An article “The Age of Surplus” (June 12, 2018) in the Indian Express stated: “If there is one thing that has changed in Indian agriculture in recent times, it is supply response — the ability of farmers to increase production when prices go up. Traditionally, the supply curve in most crops was near vertical: No matter the price, the quantity harvested and sold remained virtually the same.”

The article goes on to say: “In short, the farm supply curve has been flattened, both by better seed technology and improved roads, electricity, irrigation and communication infrastructure. Farmers are also more aware about prices and the latest hybrids/varieties, crop protection chemicals, machinery and agronomic practices — from laser levelling and raised-bed planting to seed treatment — than, say, 20 years ago.”

Draw and label separate graphs showing supply and demand before the change and after the change. Discuss the differences between the two graphs.