Economics Homework Help

I’m working on a finance multi-part question and need an explanation to help me learn.

I.

Problems (Please show all work and remember to label all graphs!)

1) Marginal Analysis

You are the manager of GetMoney Inc. and you produce cardboard boxes.
Suppose that you hired a consultant for your company to estimate the demand for
your cardboard boxes. You collect data on the price and quantity of boxes sold and
send it to your consultant, who then estimates the inverse demand equation as P = 11
– (2.5)*Q. Please also assume that you have a fixed cost of $1 and that the variable
cost as estimated by your consultant is V(Q) = 5Q + (0.5) ∗ 2.

1. a) What is the quantity that maximizes profits based upon the above information?
   What are the corresponding maximum profits that you can earn? (Please use
   graphs to support your answer.)
2. b) At the quantity that maximizes net benefit, are marginal benefits positive,
   negative, or zero? At this quantity, would you recommend increasing production
   in order to increase net benefits? Why or why not. (Please use graphs to support
   your answer).
3. c) Are marginal benefits equal to zero at this quantity? Why or why not?

1

2) Supply and Demand/Demand Analysis

Suppose that your analyst estimates the demand equation for good X as given
below:

=12− − −2 +2

Good X sells for $2 per unit, good Y sells for $1 per unit, good Z sells for $1 per unit,
and consumer income is $5.

1. Please indicate whether good Y and Z are complements or substitutes and include in
   your response whether you think it is possible for a single good to have multiple
   complements or substitutes. If you answer yes to this question, please provide a real-
   world scenario in which this situation would hold.
2. Using the information provided by your analyst, please determine the demand
   equation. (Please use graphs to support your answer).
3. Please calculate the own price elasticity of demand for good X. Is the demand for
   good X elastic, inelastic, or unit elastic? (Please use graphs to support your answer
   and indicate the region of the demand equation on the graph from part b in which
   your calculation of own-price elasticity lies.)

II. Essays
3) Supply and Demand

For this question, please find an article from a mainstream news source that
discusses the effect of supply and demand shocks on prices in the market for the
product. Please also discuss whether you think that the graphs and noted shocks
are consistent with the zoom lecture on supply and demand regarding price effects.
(please use graphs to support your answer).

4) Elasticity of demand

For this question, please find an article from a mainstream news source that
covers the topic of elasticity of demand, which highlights the importance of
elasticity of demand, prices, and revenues and discuss how these three concepts
are related within the context of the article. (please use graphs to support your
answer).