9. You read in the Friday newspaper that consumers have a linear demand for coff
ID: 1163272 • Letter: 9
Question
9. You read in the Friday newspaper that consumers have a linear demand for coffee mugs, wanting 50 coffee mugs at a price of S5/mug and 70 mugs at a price of S3/mug. On Sunday, however, you read that a change in preferences on Saturday has made it so consumers still have a linear demand, but want 4 fewer coffee mugs at a price of $8/mug and 12 fewer mugs at a price of $4/mug than they wanted initially. What is the new market demand equation for coffee mugs? (Hint: Although both demand curves are linear they are not necessarily parallel to one another.) a. Q= 100-10P b. Q-100 - 1/8P c. P 10- 1/10Q d. P- 10- 1/8Q 10. You have $2000 you must either spend on chickens ($10 each) or pigs ($60 each). If the number of chickens you buy is y and the number of pigs you buy is x, which of the following lines describes the relationship between the money you have to spend and your purchases of chickens and pigs? ?. ? 200-6x b. x 300- 5y ?. ? 100-3xExplanation / Answer
9. Demand on Friday-
50 coffee mugs at $5/ mug and 70 coffee mugs at $3/ mug.
So we can observe the trend of the demand of mugs. If the prices decrease by $2 / mug i.e., from $3 to $5, the quantity demanded of mug falls by 20 units from 70 to 50 coffee mugs.
It means the demand schedule on friday is :
And on saturday preferences change and the new quantity demanded are;
- (20 - 4) at price $8 / mug
i.e., 16 mugs at $8/mug
and (60 - 12) = 48 mugs at $4/ mug.
So the demand fuction that satisfy both these points i.e., (Q, P) = (16.8) and (48, 4)
is d) P = 10 - (1/8)Q
Put P = 8, so Q must be equal to 16 to satisfy point (16,8)
8 = 10 - (1/8)Q
(1/8)Q = 2
Q = 16 means this demand function satisfy the point (16, 8)
similarly Point (48, 4)
Put Q = 48, P must be 4 from the equation
P = 10 - (1/8)* 48
P = 10 - 6
P = 4
so this point also satisfied from this demand fuction.
SO correct ans is d) P = 10 - (1/8)*Q
10. $2000 = I ( Income)
Chicken (y) is $10 each and pigs(x) is $60 each and we can either buy chicken or pigs.
It means that 10y = 60x
y = 6x
Budget line equation is : Px* Qx + Py *Qy = I
Px = 60 and Py = 10 and I = 2000
budget line : 2,000 = 60 Qx + 10Qy
Put this value of y in all the equation, the equation which gives the value of x and y which satisfy the budget line is the line which best describe the relationship between pigs and chickens.
a. y = 200 - 6x
put y = 6x
6x = 200 - 6x
12x = 200
x = 16.66
y = 99.96 = 100
PUt the value of x and y in budget line,
Right hand side of Budget line
60 * Qx + 10 * Qy
Qx = 16.66 and Qy = 100
60*16.66 + 10*100
999.6 + 1000
1999.6 = 2000
RHS = LHS
hence this line describe the relationship between the money we spend and the purchase of chicken and pigs.
Price per mug Quantity Demanded of mugs 2 80 3 70 4 60 5 50 6 40 7 30 8 20Related Questions
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