Problem 1 Suppose the demand and supply curves for eye examinations have the fol
ID: 1133724 • Letter: P
Question
Problem 1
Suppose the demand and supply curves for eye examinations have the following equations,
Qd=1000 – 10P
Qs=-100 + 10P
Use the two given equations to determine the market equilibrium price and quantity traded by patients and eye doctors.
Problem 2
Suppose the following data describe the demand and supply for blood glucose meters in a given competitive market:
Price of Blood Glucose Meters ($)
Quantity Demanded
Quantity Supplied
50
1000
7000
45
2000
6000
40
3000
5000
35
4000
4000
30
5000
3000
25
6000
2000
20
7000
1000
15
8000
0
a. What is the equilibrium price of blood glucose meters?
b. Sketch the demand and supply curves for blood glucose meters in a single quadrant, and indicate the equilibrium price and quantity. (Hint: use excel to graph these functions)
Problem 3
GE Healthcare wants to accurately project the demand for its computerized tomography (CT) scans. A member of ADU’s ECON 550 class helped GE in the development and estimation of an econometric model that can be used to predict demand for this important line of products. Sales forecast is indispensable for budgeting and other financial and operating planning activities. The estimation of the econometric model is as follows:
Where
QCTGE= Quantity of CT scans sold by GE Healthcare
PCTGE= Price of GE Healthcare CT scans
PCTS= Price of Siemens Healthcare CT scans
PR= Price of Radiologists
I= Per capita income, and
A= Dollars spent annually on advertising
a. How many CT scans are expected to be sold next year, given the following values?
PCTGE= $25,000
PCTS= $30,000
PR= $100
I= $50,000
A= $200,000
b. Find the price elasticity of demand assuming the following relevant historical averages:
QCTGE= 6,200
PCTGE= $23,000
PCTS= $18,000
PR= $90
I= $45,000
A= $190,000
c. See Part b above. Is the price elasticity of demand elastic or inelastic? Please explain.
d. See Part b above. If the price of GE scans is increased, does total revenue increase? Please explain.
e. See Part b above. Find the cross price elasticity of demand, and, based on your finding, classify GE and Siemens CT scans as complementary or substitute goods.
Price of Blood Glucose Meters ($)
Quantity Demanded
Quantity Supplied
50
1000
7000
45
2000
6000
40
3000
5000
35
4000
4000
30
5000
3000
25
6000
2000
20
7000
1000
15
8000
0
Explanation / Answer
1.At equilibrium Qd=Qs.
Solving both the equations, we get-
1000-10P=-100+10P
20P=1100
P=55
Q=1000-10(55)
Q=450
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