Question

Calculate elasticity values for part a (Must: show all calculations):                               

  1. Calculate elasticity values for part a (Must: show all calculations):                                           [2 + 2 = 4]
  1. Suppose firm XYZ (selling good x) has calculated its demand function from its past data & related variables and it arrives at the following demand function:

Qx = 2600 – 10 Px – 2Py + .04I

Where: Px, Py and I stand for price of good x, price of related good y and average income.

If given values are Py = Rs. 200 and I = Rs. 2000, then:

  1. Write the equation for demand curve for good x.
  2. At Px = Rs. 50, what is the TR of the firm?
  3. At the same price level, what is the MR of the firm?
  4. If the income increases to Rs. 2500, then what extra demand will be created?

  1. If the demand curve for a firm ABC for item A is given by: QA = 600 – 1.2 Pa , then*:

  1. At what quantity & price value will the firm maximize TR or total revenue?
  2. What is the maximum TR that can be achieved by the firm on this demand curve?
  3. What is the MR or marginal revenue at this point?

*Derive all answers from the demand curve function given and show all steps.

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