Question

The monthly demand for a certain brand of perfume is given by the demand equation

p=100e^-0.0002x+150

where p denotes the retail unit price (in dollars) and x denotes the quantity (in 1-oz bottles) demanded.

a. Find the rate of change of the price per bottle when x = 1000 and when = 5 2000.

b. What is the price per bottle when x =1000? When x =
2000?

1. (10 pt) For the data given:

(i)

State and solve part (a).

(ii) Write a complete sentence explanation of what (a) tells
you. Be sure that

your explanation includes units, and contains the phrase “for
each

additional bottle you plan to produce and sell, you will have to
lower your

price by…”.

(iii) State and solve (b).

(iv) Write a complete sentence explanation of what (b) tells you.

2. (10 pt) For this problem:

(i)

Explain the domain of the function. (HINT: Consider which
x-‐values would

possibly make no sense here in the formula.)

(ii) Write down the first and second derivatives of the price function.

(ii)Explain why you would expect the first derivative to always
be negative.

[NOTE: This has NOTHING to do with how you calculate
derivatives.

So start with the phrase “If you want to sell more bottles, you
have to …..?

(iii) Draw the signs diagram for the first and second
derivatives.

(iv)If you were to sketch this function, what would be its
y-‐intercept? Explain

what did that mean about the maximum price you can charge?

(v)Find the limit of our function as x goes to infinity. Then
explain in

complete sentences what this means.

(vi) So what is the horizontal asymptote for the graph of our
demand

function?

(vii) Now draw axes, label them including units, and sketch this
function.

Choose a scale such that you can be sure to include all of the
information

contained in #1. Label the points you found in #1.(b), the
intercept from

2.(iv), and the asymptote from 2.(vi).

(viii) Finally, explain how you used the signs diagram from
2.(iii) is to get the

shape of the curve in your sketch. Be sure your explanation
includes the

phrases “concave (up?)/(down?)…” and “(in?)/(de?)creasing”.

Answer #1

1.Suppose there are two consumers, A and B.
The utility functions of each consumer are given by:
UA(X,Y) = X^1/2*Y^1/2
UB(X,Y) = 3X + 2Y
The initial endowments are:
A: X = 4; Y = 4
B: X = 4; Y = 12
a) (10 points) Using an Edgeworth Box, graph the initial
allocation (label it "W") and draw the
indifference curve for each consumer that runs through the
initial allocation. Be sure to label your graph
carefully and accurately....

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Question 4
a. Explain own price, cross price and income elasticities of
demand and how they are measured.
b. Suppose the demand function facing a company manufacturing a
particular product (X) is given by
Qx = 62 -2Px + 0.2M + 25A
Where:
Px is the price of the product
M is the consumer income, and
A is the amount of advertising expenditure.
If Px is 4, M is 150 and A is 4
You are required to calculate:
i....

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P = 100 – 0.2 Q
Suppose fixed cost is zero and marginal cost is given by MC =
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Answer the following questions.
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To assist you in this task, Jung So Min has gathered the
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1. For a pair of sample x- and y-values, what is the difference
between the observed value of y and the predicted value of y? a) An
outlier b) The explanatory variable c) A residual d) The response
variable
2. Which of the following statements is false:
a) The correlation coefficient is unitless. b) A correlation
coefficient of 0.62 suggests a stronger correlation than a
correlation coefficient of -0.82. c) The correlation coefficient,
r, is always between -1 and 1....

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