Assignment: Intermediate Microeconomics

QUESTION 1:

A perfectly competitive industry has identical firms and identical consumers. Each consumer earns $10,000 a year.

1. The demand curve is Q=100-5P.
2. The supply curve is Q=20+3P.

a)What is the equilibrium price?
b)What is the equilibrium quantity?
c)What is the price elasticity of demand at the equilibrium price?
d)What is the price elasticity of supply at the equilibrium price?
e)If consumers earn $11,000 a year, their demand curve changes to Q = 104 - 4P. What is the income elasticity of demand at an income of $10,000?

QUESTION 2:

Find the slope of an assumed linear demand curve for Cinema tickets, when persons purchase 1,000 at $5.00 per ticket and 200 at $15.00 per ticket

QUESTION 3:

How would the following changes in price affect total revenue? That is, would total revenue increase, decline, or remain unchanged?

a) Price falls and demand is inelastic
b) Price rises and demand is elastic
c) Price rises and supply is elastic
d) Price rises and supply is inelastic
e) Price rises and demand is inelastic
f) Price falls and demand is elastic
g) Price falls and demand is of unit elasticity

QUESTION 3:

Figure 3.1 and 3.2 describe a shift in demand in the short run and long run in a competitive market. With your knowledge on how firms operate in a competitive market. Give a detailed explanation to the figures.