ECON2001 - The Demand for Organic Beef - Supply of Pespi - Economics Assignment Help

Assignment Task

Questions

(1) The demand for organic beef is given by the following equation: Qdo = 35 − 2Po + Pc + 4I where Po is the price of organic beef, Pc is the price of conventional beef, and I is the average consumer income.
(a) Graph the inverse demand curve for organic beef when Pc=5 and I=5 What is the choke price? 
(b) Using the demand function from (a), what is the quantity demanded of organic beef when Po=5 When P0=10.
(c) Suppose PC increases to 15, while I remains at 10. Calculate the quantity demanded of organic beef. Show the effects of this change on a graph and indicate the choke price.
(d) What happens to the demand for organic beef when the average con sumer’s income increases? Is beef a normal or an inferior good?
(2) The supply of Pespi is given by the following equation: QpS = −24 + 6Pp + Pc + 2Pw where QpSis the quantity of Pespi supplied, in millions of litres, Pp is the price of Pespi per litre, Pc is the price of Coek per litre; and Pw is the price of the water used to make the products per litre. 

(a) Graph the inverse supply curve when Coek sells for $4 a litre and water sells for $2 a litre What is the supply choke price?

(b) How much Pespi will be supplied at a price of $4 and a price of $8?

(c) What will happen to the supply of Pespi if the price of Coek increases to $6 per litre? Graph the new inverse supply carefully and indicate the new choke price.
(d) Suppose instead that the price of Coek remains $4, but the price of water decreases to $1. What will happen to the supply of Pespi as a result? 

(3) The Australian Government believes that maintaining a viable airline indus try is essential to the long term sustainability of the country’s tourism - so in order to support them in a post covid travel environment they are propos ing to subsidise the purchase of tickets. The demand for tickets is given by Qd = 5000 − 10P and the supply is Qs = 2000 + 10P.

(a) Solve for the equilibrium price and quantity in this market, and calculate producer and consumer surplus.

(b) Suppose the government offers a $100 per ticket as a subsidy, recalculate the equilibrium price and quantity to reflect the subsidy. What will be the price paid by ticket buyers be and the price received by sellers? 

(c) How much will the subsidy program cost the government and what will be its net effect on the total surplus? 

(4) The annual demand for water flavoured with barley and hops in Newcastle (Australia) is estimated to be P = 20 − 0.001QD and the supply is estimated to be P = 4 + 0.000333QS.

(a) Find the equilibrium price and quantity of this flavoured water. 

(b) Calculate the consumer and producer surplus at the equilibrium price. 

(c) What is the total surplus created in the market for flavoured water? 

(5) Biosolid Systems is a small business that employs 20 minimum wage workers and 10 units of capital (in the form of hydro-lines, routers, tanks, etc.) to service 10 systems. Biosolid’s currently minimising costs at $400 per hour, as depicted in the following diagram: 

(a) What is the minimum wage and the rental rate where Biosolid Systems is located? 

(b) Suppose that the city government doubles the minimum wage in a bid to attract more unskilled workers. Draw a new isocost curve corresponding to C = $400 that reflects this change. How will this impact Biosolid Systems’ cost of serving its customers?

(c) Following protests of the wage increase by small business owners, the city government decides to compensate those owners by sending them a lump-sum subsidy. Biosolid Systems, which was employing 20 workers.

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