e formula or equation from which you have arrived at the answer. II spreadsheet

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e formula or equation from which you have arrived at the answer. II spreadsheet and the formulas are hidden in the cells of the spreadsheet, make sure tha uill On 8.5" each numeric answer, you should you do your work on a you also show the formula alculations all based on the sa missing steps, but sides of your paper x 11" paper, do the exercises below. Make sure that you show all the steps le show th it is enough to show the formula once. Points will be deducted for points will be awarded for steps that are correct even if the final answer is wrong. Use both before you print out your answers. For multiple 1. Suppose the demand c by Q 20+2P. What is the equilibrium price and quantity? Hint: Review Lecture 2, Slide urve for a product is given by Q 100-3P and the supply curve is given revenue when we mov e from point 1 to point 2 using the following two points along a demand curve: point 1 (S17, 40) and point 2 ($8, 150). Determine if the demand is elastic; then find the total revenue when we are at point 1 The change in total revenue is obtained by total revenue at point 2 minus total revenue at point 1. Hint: and the total revenue when we are at point 2. Review Lecture 3, Slides 16-17 3. (a) Suppose that when the price of peanut butter rises from $2.10 to $3.20 per jar, the quantity of jelly purchased falls from 30 million jars to 22 million jars. What is the cross-price elasticity of demand between peanut butter and jelly? Are they complements or substitutes? (b) Suppose that when the price of peanut butter experiences the same rise, the quantity of jelly purchased rises from 20 million jars to 26 million jars. What is the cross-price elasticity of demand between peanut butter and jelly? Are they complements or substitutes? NOTE: Round all intermediate calculations to 6 decimal places, and state both cross-price elasticities to 4 decimal places. Let A-jelly and B-peanut butter in the cross-price elasticity formula. Hint: Review Lecture 4, Slides 2-5 income is $180, they buy 200 units of a good. When consumers income increas 4. When consumers' to $300, they buy 320 units. Find the income elasticity of demand using the midpoint formula. e good inferior or normal? Is it a luxury good? NOTE: Round all intermediate calculations to Hint: Review Lecture 4 Slides 6-8

Explanation / Answer

(1)

In equilibrium, quantity demanded equals quantity supplied.

100 - 3P = 20 + 2P

5P = 80

P = $16

Q = 100 - (3 x 16) = 100 - 48 = 52

(2)

Total revenue (TR) = Price (P) x Quantity (Q)

TR at point 1 = $17 x 40 = $680

TR at point 2 = $8 x 150 = $1,200

Change in TR = $1,200 - $680 = $520 (TR increases)

Since a decrease in price (from $17 to $8) increases total revenue, demand is elastic.

NOTE: As per Chegg Answering guidelines, first 2 questions are answered.

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