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Suppose there are 8,000 identical individuals in a market for LatinDance videos, each with a demand function represented byQdx=12-2Px, and 400 identical producers of Latin Dance videos, each with a supply function of Qsx=10Px.

- What is the market demand and market supply function for LatinDance videos?

- How do I obtain the market equilibrium price and quantity using algebra?

-Derive the market demand and market supply schedule for dance videos at prices ranging from $1 to $6 and sketch the market demand and market supply curves and label the equilibrium price and quantity.

- Use the Demand equation to find the price elasticity of demand. Is the price elasticity demand elastic or inelastic?


- Interpret the elasticity of demand and state by how much quantity in demand would fall if the price for dance videos would increase by2%.

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Namita kumari
Namita kumariLv6
28 Sep 2019

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Related questions

Suppose that the equilibrium price of copper is 5 and the equilibrium quantity of copper is 20. At the market equilibrium, the price elasticity of demand for copper is -0.5, and the price elasticity of supply for copper is 1.0

a) Is the demand for copper elastic or inelastic at the market equilibrium? Explain briefly

b) Assume that the supply and demand curves are linear. Find the equations for supply and demand.

c) Suppose that the quantity of copper supplied at each price falls by 50%. What are the new equilibrium price and quantity?

d) What are the price elasticities of demand and supply at the new equilibrium?

1. Using supply-and-demand diagrams, show the effect of the following events on the market for sweatshirts.

(a) A hurricane in South Carolina damages the cotton crop.

(b) The price of leather jackets falls.

(c) All colleges require morning exercise inappropriate attire

(d) New knitting machines are invented.

 

2. (a) What is the definition of quantity demanded?

(b) What is the definition of quantity supplied?

(c) List the 5 factors that cause the demand curve to shift to the left or the right.

(d) Choose one of the factors from part (b) and consider the market for bananas. On a well-labeled diagram, demonstrate what will occur in this market if there is a change in this factor.

(e) List the 4 factors that cause the supply curve to shift to the left or the right.

(f) Choose one of the factors from part (e) and consider the market for scooters. On a well-labeled diagram, demonstrate what will occur in this market if there is a change in this factor.

(g) Choose one factor from part (b) and another from part (e) and consider the market for minivans. On a well-labeled diagram, demonstrate what will occur in this market given the change in both factors. (Hint: Draw separate diagrams for parts (d), (f), & (g))

3. Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows:

page1image3877024

(a) Draw the demand and the supply curves. What is unusual about this supply curve? Why might this be true?

(b) What are the equilibrium price and quantity of tickets?

(c) Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule:

page1image3870304

Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity?

 

 

4. Market research has revealed the following information about the market for chocolate bars: The demand schedule can be represented by the equation QD = 1600 − 300P, where QD is the quantity demanded and P is the price. The supply schedule can be represented by the equation QS = 1400 + 700P, where QS is the quantity supplied.

(a) Sketch a graph representing the market for chocolate bars. Identify the equilibrium point on your graph.

(b) Calculate the equilibrium price and quantity in the market for chocolate bars.

 

5. For each of the following pairs of goods, which good would you expect to have more elastic demand and why?

(a) Required textbooks or mystery novels

(b) Beethoven recordings or classical music recordings in general

(c) Subway rides during the next six months or subway rides during the next five years

(d) Root beer or water

(e) Insulin or Tylenol

(f) Food or bananas

 

6.Consider the following information from the market for lemonade:

Price Quantity Demanded Quantity Supplied
$1 500 cups 150 cups
$2 200 cups 310 cups

(a)  As the price changes from $1 to $2, what is the value of price elasticity of demand?

(b)  As the price changes from $1 to $2, what is the value of price elasticity of supply?

(c)  Sketch a diagram demonstrating the market for lemonade. Are the supply and demand curves relatively inelastic or elastic? Explain.

(d)  Suppose that when the price of lemonade increases from $1 to $2, the quantity demanded of orange juice increases from 150 cups to 190 cups. Calculate cross-price elasticity of demand for orange juice.

(e)  Are orange juice and lemonade substitute or complementary goods? Explain.

 

7. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:

page2image1834528

(a)  As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations)

(b)  Why might vacationers have a different elasticity from business travelers?

 

8. Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run.

(a)  If the price of heating oil rises from $1.80 to $2.20 per gallon, what happens to the quantity of heating oil demand in the short run? In the long run? (Use the midpoint method in your calculations)

(b)  Why might this elasticity depend on the time horizon?


9. The Government has decided that the free-market price of cheese is too low.

(a) Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese?

(b) Farmers complain that the price foor has reduced their total revenue. Is this possible? Explain

(c) In response to farmer's complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?

Assume that the demand for iron (the primary component of steel) is Q = P^(-a)? , where the exogenous parameter a>0 takes some fixed value. For all parts assume that the iron market is in equilibrium. You should simplify your answers as much as possible.

(a) Find the inverse demand curve for iron.

(b) Does the demand for iron satisfy the Law of Demand?

(c) What is the elasticity of demand for iron, as a function of Q and the parameter a? For parts (d)-(f) assume that a=2 and the supply of iron is Q = 8P.

(d) What are the equilibrium price and quantity of iron? If the value of a is unknown, then what are the equilibrium price and quantity as functions of a?

(e) Draw a picture that shows the supply and demand curves (including two exact points on each curve) and the equilibrium.

(f) Suppose that? increases from its initial value of a=2. Does this represent an increase or decrease in demand; supply; quantity supplied; and quantity demanded?

For parts (g) and (h) continue to assume that a=2, but now assume that supply increases to Q = 9P.

(g) Find the new equilibrium price and quantity. Draw a new picture, showing the old (assuming Q=8P) and the new demand and supply curves and equilibria. Label the old equilibrium

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