Question
In 2018, WePlay Games raised the price of its monthly subscription from $5 to $7.50, and the number of subscribers fell by 10%. In 2019,
In 2018, WePlay Games raised the price of its monthly subscription from $5 to $7.50, and the number of subscribers fell by 10%. In 2019, it raised the price again from $7.50 to $10.00, and its revenue increased by 5%.
a)What was the price-elasticity of demand for WePlay Games' product in 2018?
b)What was the price-elasticity of demand for WePlay Games' product in 2019?
c) What might explain the difference in the elasticities in 2018 and 2019?
Suppose the market supply and demand for electricity in Luna city are:
Qs = 10 P
Qd = 100 - 10 P
where Qs is the quantity supplied of electricity, Qd is the quantity demanded of electricity, P is the price of electricity.
a)What would be the equilibrium price and quantity if electricity is competitively supplied?
b)What would be the levels of consumer surplus and producer surplus?
c)What would be the equilibrium price and quantity if the market is supplied by a monopoly? (hint: from the demand function, we know the monopolist's marginal revenue: MR = 10 - 0.2 Q)
d)Suppose the market is supplied by a monopoly, and you are the regulator wanting to achieve the competitive outcome, how would you regulate the monopoly?
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