1. The demand curve for tickets to a Beyonce concert is as follows:
Q = 100 - 0.2P
At a price of $30 per ticket, what is the consumer surplus from concert tickets? (Hint: find the inverse demand so that you know the maximum price anyone will pay.)
2. You are the manager of a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your market, you also compete against major brands such as Mountain Dew and Dr. Pepper. Suppose that, due to the successful lobbying efforts of sugar producers in the United States, Congress is going to levy a $0.50 per pound on all imported raw sugar-the primary input for your product. In addition, Mountain Dew and Dr. Pepper plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the equilibrium price and quantity of generic soft drinks? (Use diagrams to illustrate your answer.)
3. A mathematical demand function for new Hyundais sold per year for a dealer is as follows:
QT = 200 - .01PT + .005PM - 10PG + .01M + .003A
Where PT = the average price of Hyundais, PM = the average price of Mercedes, PG = the price of gasoline, M = per capita income, and A = dollars spent annually on advertising.
a) Find the point price elasticity of demand for the Hyundais if PT = $25,000,
PM = $20,000, PG = $1.00, M = $25,000 and A = $10,000.
b) Is the (own) price elasticity of demand elastic, unitary elastic, or inelastic?
c) Find the point cross elasticity of demand for Hyundais and Mercedes at the prices given in part a).
d) Are Hyundais and Mercedes substitutes or complements? How do you know
4. Given the price now prevailing for aluminium products, would you expect that the price elasticity of demand for the output of US Aluminium Corporation is higher or lower than the price elasticity of demand for the output of the global aluminium industry as a whole? Why?