20 Jun WHY IS IT NECESSARY FOR PRICE TO SERVE THIS FUNCTION IN THE MARKET ECONOMY?
Directions: Complete the following assignments form the text. . Chapter 3: Problems 1, 5 (pg. 58-59) . Chapter 4: Problems 7, 8 (pg. 96) . Chapter 5: Problems 2, 7 (pg. 162-163); 2, 5 (pg. 164-165) Chapter 3 questions: Question 1: Define demand, Define supply. In your answers, explain the difference between demand and quantity demanded and between supply and quantity supplied. Question 5: Define the rationing function of price. Why is it necessary for price to serve this function in the market economy? Chapter 4 Questions: Question 7: Why is it unlikely that a firm would sell at a price and quantity where its demand curve is price inelastic? Question 8: Which products would exhibit a higher elasticity with respect to interest rates, automobiles or small appliances? Why? Chapter 5 questions: Question 2: Would there be any differences in the set of variables used in a regression model of the demand for consumer durable goods (e.g., automobiles, appliances, furniture) and a regression model of the demand for “fast-moving consumer goods” (e.g., food, beverages, personal care products)? Explain. Question 7: What is the identification problem? What effect will this problem have on the regression estimates of a demand function? Explain. Question 2: Enumerate methods of qualitative and quantitative forecasting. What are the major differences between the two? Question 5: Discuss some of the important criticisms of the forecasting ability of the leading economic indicators. Chapter problems in the book: Chapter 3 Problem: Problem 1 in the book: The following function describes the demand condition for a company that makes caps featuring names of college and professional teams in a variety of sports. Q= 2,000 – 100P Where Q is cap sales and P is price. a. How many caps could be sold at $12 each? b. What should the price be in order for the company to sell 1,000 caps? c. At what price would cap sales equal zero? (page 58) Problem 5 in the book: The ABC marketing consulting firm found that a particular brand of tablet PCs has the following demand curve for a certain region: Q= 10,000 – 200P + 0.03pop + 0.6i + 0.2A Where Q is the quantity per month, P is price ($), pop is population, i is disposable income per household (S), and A is advertising expenditure ($). a. Determine the demand curve for the company in a market in which P=300, pop=1,000,000 i= 30,000, and A=15.000. b. Calculate the quantity demanded at prices of $200, $175, $150, and $125. c. Calculate the price necessary to sell 45,000 unites. (page 59) Chapter 4 problems: Problem 7 in the book: The ABC company manufactures digital clock radios and sells on average 3,000 units monthly at $25 each to retail stores. Its closest competitor produces a similar type of radio that sells for $28. a. If the demand for ABC’s product has an elasticity coefficient of -3, how many will it sell per month if the price if lowered to $22? b. The competitor decreases its price to $24. If cross-price elasticity between the two radios is 0.3, what will ABC’s monthly sales be? (page 96) Problem 8 in the book: The Mesa Redbirds football team plays in a stadium with a seating capacity of 80,000. How-ever, during the past season, attendance averaged only 50,000. The average ticket price was $30. If price elasticity is -4, what price would the team have to charge in order to fill the stadium? If the price were to be decreased to $27 and the average attendance increased to 60,000, what is the price elasticity?
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