Question

Let Jack’s total value of coconuts be given by the following schedule.

Q            1             2             3             4             5             6             7             8             9             10

TV          10           19           27           34           40           45           49           52           54           55

And let Meg’s TV be given by the following schedule.

Q            1             2             3             4             5             6             7             8             9             10

TV          20           38           54           68           80           90           98           104        108        110

1. If there are 10 coconuts to divide between Jack and Meg, the efficient way to allocate them is for Jack to get _____ and for Meg to get ____ . (No units required, answers are integers.)

2.

Imagine that you give all ten coconuts to Jack but that Jack and Meg trade as though they were in a perfectly competitive market. (Note that the assumptions aren't met but just assume that they are.) What will the price and quantity be and what will consumer and producer surplus be? (There are two answers I will accept for producer surplus because there are two ways of doing it that both make sense as I mentioned in class.)

P=  

Q=  

CS=  

ps=  

3. When the price of a good increases by 6%, the quantity demanded decreases by 13%. What is the elasticity of demand for this good? (Round to two decimal places.)

Answer 1

We are required to calculate the marginal value. Refer the attached table

Jack should get 3 units and Meg should get 7 units.

2. I don't have access to your class notes so I cannot solve it as per your instructor.

3. Elasticity of demand can be measured using the following formula