5. (a) The per capita demand for a good is estimated to be In(p-1.8-1.1ln(g)+0.7

Question

5. (a) The per capita demand for a good is estimated to be In(p-1.8-1.1ln(g)+0.7ln(Y) (q: per capita consumption, Y: median income). Find the total amount of consumption in a city with population 250,000 and median income 9,000 if the price is $2. (b) There is one beach in a country. The per capita visit to the beach from any city of the country is estimated to be q=0.00 l Y-021C+1.5 (q: per capita visit, Y: median income, C: total cost of visiting the beach). Find the total benefit from visiting the beach to a city with Y-9,000, C-20 and population-20,000.

Explanation / Answer

Question 5). a). Solution :- In (2) = - 1.8 - 1.1 In (q) + 0.7 In (9000)

0.6931 = - 1.8 - 1.1 In (q) + 0.7 * 9.10498

0.6931 = - 1.8 - 1.1 In (q) + 6.373486

1.1 In (q) = 4.573486 - 0.6931

1.1 In (q) = 3.880386

In (q) = 3.880386 / 1.1

In (q) = 3.52762

q = 34.042 (Rounded off to 34)   

Note :- In (34.042) = 3.5276 (approx).

Total consumption value = 250000 * 34

= $ 8500000.

Conclusion :- Total amount of consumption in the city = $ 8500000 (approx).

Question 5). b). Solution :- q = 0.001 * 9000 - 0.21 * 20 + 1.5

= 9 - 4.20 + 1.50

= 6.30

Total benefit in the given question = 6.30 * 20000

= $ 126000.

Conclusion :- Total benefit from visit of beach to city in the given question = $ 126000.

  

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