eco for business

1

Qd=8000-16*P+0.75M+30R

A. Derive the demand equation when M = $30,000 and R = $50.

B. Find the value of the SLOPE and Y-Intercept.

C. Graph the demand equation from part a) above.

D. Derive the inverse demand function from part a).

E. Using the inverse demand function, calculate the demand price for 24,000 units of a good.

2

Qd = 3200-10P+0.05M+24R

A. Derive the demand equation for M= $52000 and R = $200.

B. Graph the demand equation from part a).

C. Derive the inverse demand function from part a).

4

What happens to DEMAND when the following changes occur?

A. The price of the commodity falls.

B. Income increases and the commodity is normal.

C. Income increases and the commodity is inferior.

D. The price of a substitute increases.

E. The price of a substitute decreases.

F. The price of a complement good increases.

G. The price of a complement good decreases.

Number 5

Rent Controls

QD

QS

$500

375000

225000

600

350000

250000

700

325000

275000

800

300000

300000

900

275000

325000

1000

250000

350000

A.  In the absence of rent control, what is the equilibrium rent, and what is the equilibrium quantity demanded?  How many apartments are supplied in equilibrium?

B.  Draw a demand and supply graph of the market for apartments.

C.  In equilibrium will there be renters who are unable to find a n apartment to rent, or landlords unable to find a renter?

D.  Suppose the government sets a price ceiling of $600 per month on rents.  What is the quantity of apartments demanded, and how many

apartments will be supplied?  

E. Is there a shortage or surplus of apartments at $600 per month? By how much?

F.  Add the price ceiling of $600 to your graph.  Show the shortage or surplus on your graph.