CDEEGDH Term 2 AH 2ll21-2l122 Problem Set 1 Instructions: 1. Feed the questions carefully and answer only what is required. Show complete solutions. incomplete solutions will not be credited. For nal answers that involve decimal places. round off to the nearest 2 decimal places. Box your final answers. For nos. 1-4. consider the following problem {10 pts]: As an economist hired by Apple Inc., the company wants you to compute the elasticity of demand of their iPad mini products. The table below shows an observation the company made: Quantity [per unit} 1. {3 pts] What is the price elasticity of demand between observation 1 and observation 3'? 2. {2 pts] Based on your computation in #1. is the price elasticity of demand for iPad minis elastic, unit-elastic+ or inelastic? What is the interpretation? 3. {3 pts] What is the price elasticity of demand between observation 4 and 3? 4. [2 pts] Based on your computation in #3, is the price elasticity of demand for iPad minis elastic, unit-elastic. or inelastic? What is the interpretation? For nos. 5-9. consider the following problem {2t} pts]: You were hired by Samsung to do an analysis on their two leading products. the Samaung Galaxy 522 Plus and 522 Ultra. The table below shows the possible combinations of both smartpbones that they could produce monthly: Altematlve Samsunp Galaxy 522 Samaunp Galaxy 522 Hits {per unit} Flue {per unit} -\" B 1200 300 O 800 600 D 400 E 0 900 5. (4 pts) Graph the Production-Possibility-Frontier (PPF) curve with S22 Plus in the x-axis and S22 Ultra in the y-axis. 6. (4 pts) Suppose Samsung wants to produce 900 units of the Galaxy S22 Plus and around 500 units of the Galaxy S22 Ultra. Would the company be producing efficiently or inefficiently? Why? 7. (4 pts) Samsung now acquires a new factory in the Philippines and they are able to produce more units of both their smartphones. Draw the new PPF curve that can best represent the change/shift together with a good explanation. 8. (4 pts) Assuming S22 Plus is Good X and S22 Ultra is Good Y, what is the Marginal Rate of Transformation (MRT) from alternative A to C and its interpretation? 9. (4 pts) Assuming S22 Ultra is Good X and S22 Plus is Good Y, what is the Marginal Rate of Transformation (MRT) from alternative D to B and its interpretation? For nos. 10-15, consider the following problem (20 pts): You are studying the supply and demand for a certain good. The demand curve is given by the equation P = 1200 - 10Q while the curve is given as P = 450 + 10Q. Answer the following questions: 10. (3 pts) Draw the graph representing the supply and demand curves. 11. (3 pts) What would be the equilibrium price and quantity of the good? 12. (5 pts) A new firm enters the market that produces the same good, which shifts the supply curve to P = 890 + 30Q. What would be the new equilibrium price and quantity? Draw the graph, show the shift and new equilibrium price and quantity. 13. (5 pts) Because of the entry of the new firm, the government suddenly proposes a policy in order to protect the market. This causes the demand curve to shift to P = 1350 - 40Q. Using the new supply curve in #12, what would be the new equilibrium quantity and price? Draw the graph, show the shift and new equilibrium price and quantity. 14. (2 pts) Using the demand and supply curves in #10, compute the consumer surplus. Shade and show this in the graph. 15. (2 pts) Using the demand and supply curves in #10, compute the producer surplus. Shade and show this in the graph.FORMULAS TO BE USED: Marginal Rate of Transformation (MRT) AGood Y MRTXY = AGood X Market Equilibrium with Mathematical Equations Demand Curve, D(p) = 5000 - 6Q; Supply Curve, S(p) = 400 + 70Q 5000 - 6Q = 400 + 70Q 5000 - 400 = 70Q + 6Q QE = 60.52 Demand curve = 5000 - 6(60.52) = 4636.88 = PE Supply curve = 400 + 70(60.52) = 4636.4 = PE Calculating Elasticities AQ AP ED = 7 (Q, + Q2)/2 (P, + P2)/2 Using the correct formula for elasticity: (10-30) (250-150) (10+30)/2 (250+150)/2 -2 Checking: (30-10) (150-250) (30+10)/2 (150+250)/2 VALUE INTERPRETATION demanded. demanded Price Elasticity of Supply Price elasticity of Supply. E, = % change in quantity supplied % change in price AQS AP Es = 7 (Q51 + Q52)/2 (P, + P2)/2