intermediate microeconomics Answer the following questions clearly and completel

Question

intermediate microeconomics Answer the following questions clearly and completely. Be sure to show enough of your work we want to be able to see how you arrived at your answers so that we can understand your thought process and give partial credit if warranted. You are welcome and encouraged to work in groups as long as the work you hand in is your own! Do not hesitate to stop by office hours if you have any questions or merely wish totalk through any aspect of the problems. Good luck! 1. Symbolic analysis of supply and demand: The following demand and supply functions provide a relatively general description of a market: Qs = D + eP where P is the price, Y is a variable denoting income, and Qd and Qs are the quantity demanded and the quantity supplied. The constants A, b, c, D, and e have values greater than zero. (a) Identify the parameters, endogenous variables, and exogenous variables in the above system of equations (b) Derive expressions for the equilibrium market price (P) and quantity (Q) and illustrate your answers with a graph. Be sure to specify the values where the demand and supply curves intersect with the P-axis and Q-axis in the positive quadrant. (c) Given your resultg from part (b), use calculus to determine the effect of a small change in income on the (d) Set the expressions for Qd and Q, from equations (1) and (2) equal to each other. This is the market equilibrium condition and thus, in this expression, we can think of the price as the equilibrium price. In equilibrium the price is a function, P'(Y), of Y. Differentiate both sides with respect to Y and solve for P'(Y) (e) Find the rY1ge of prices, in terms of A, b, & c, for which the price elasticity of demand is inelastic, i.e., > equilibrium price (P) 1. Hint: your equation will depend on Y

Explanation / Answer

1. a) Parameters are Variables that are incolved in an equation. In the given question, there are two equations for Quantity Demanded (Qd) and Quantity Supplied ( Qs). The parameters involved in the same are P = Price and Y = Income.

Endogenous Variables are variables that directly affect a dependent Variable (in the given case Qd and Qs). Thus the endogenous Varibale become P and Y.

While Exogenous Variables are variables that are hidden and affect the equation externally. In this case the exogenous equations become :

1. Price of the Substitute Goods

2. Expectation of the Customer

3. Taste and Preferences of the Customer.

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