From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Marginal Revenue |
10 |
6 |
2 |
2 |
2 |
0 |
0 |
0 |
- |
Quantity |
MR |
TR |
AR=TR/Q |
Price elasticity of demand |
1 |
10 |
10 |
10/1 = 10 |
- |
2 |
6 |
10 + 6 = 16 |
16/2 = 8 |
½ * 10/1 = 5 |
3 |
2 |
16 + 2 = 18 |
18/3 = 6 |
½ * 8/2 = 2 |
4 |
2 |
18 + 2 = 20 |
20/4 = 5 |
1/1 * 6/3 = 2 |
5 |
2 |
20 + 2 = 22 |
22/5 = 4.4 |
1/0.5 * 5/4 = 2.5 |
6 |
0 |
22 + 0 = 22 |
22/6 = 3.6 |
1/0.9 * 4.5/5 = 1 |
7 |
0 |
22 + 0 = 22 |
22/7 = 3.1 |
1/0.5 * 3.6/6 = 1.2 |
8 |
0 |
22 + 0 =22 |
22/8 = 2.7 |
1/0.4 * 3.1/7 = 11 |
9 |
-5 |
22 + (-5) = 17 |
17/9 = 1.9 |
1/0.8 * 2.7/9 = 0.38 |
Demand Curve: To determine the demand curve, we must first determine the pricing for each unit of quantity. This can be accomplished by multiplying the total revenue values by the quantity. The following are the price ranges:
Quantity |
Marginal revenue |
Total revenue |
Price |
1 |
10 |
10 |
10 |
2 |
6 |
16 |
8 |
3 |
2 |
18 |
6 |
4 |
2 |
20 |
5 |
5 |
2 |
22 |
4.4 |
6 |
2 |
22 |
4.4 |
7 |
0 |
22 |
3.66 |
8 |
0 |
22 |
3.14 |
9 |
0 |
22 |
2.75 |
10 |
-5 |
17 |
1.88 |
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A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?
Distinguish between a centrally planned economy and a market economy.
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A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.
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What is budget line?
Suppose there are 20 consumers for a good and they have identical demand functions:
d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.
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i. Above the equilibrium price
Ii. Below the equilibrium price
If duo poly behavior is one that is described by Cornet, the market demand curve is given by the equation q = 200 - 4p and both the firms have zero costs, find the quantity supplied by each firm in equilibrium and the equilibrium market price.
What is the value of the MR when the demand curve is elastic?
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If the monopolist firm of Exercise 3 was a public sector firm. The government set a rule for its manager to accept the government fixed price as given (i.e. to be a price taker and therefore behave as a firm in a perfectly competitive market). And the government has decided to set the price so that demand and supply in the market are equal. What would be the equilibrium price, quantity and profit in this case?
Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.
Suppose there are 20 consumers for a good and they have identical demand functions:
d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.
Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?
What is the ‘price line’?