Question One (1) Michael's monthly demand for peanut butter is given by the equation: (23,, =10 0.8 PM + 0.041- 0.20 p], where di equals the amount of peanut butter demanded each month, de equals the price of peanut butter, per unit. [equals Michael's monthly income, and deequals the price ofjelly, per unit. Notice that the sign on the price ofjelly is negative, indicating that when jelly increase in price, less peanut butter is purchased; thus, according to this equation, peanut butter and jelly are complements. Assume that the per unit price of peanut butter is $20.25, household income is $4,500, and the per unit price ofjelly is $25.50. Determine the amount of peanut butter demanded by Michael each month. Given the values for I and PM, determine the inverse demand function. Determine the slope of the demand curve for peanut butter. Calculate the vertical intercept (price-axis intercept) of the demand curve if income increases to $5,000 per month. Question Two (2! An individual seller's monthly supply of peanut butter is given by the equation 99F)? szd = -70.5 + 40.5 FM -5.5W where di is the amount of peanut butter supplied each month, PM is per unit price of peanut butter in dollars, and Wis the hourly wage rate in dollars paid by peanut butter sellers to workers. Assume that the price of peanut butter is $20.50 and the hourly wage is $20. Determine the amount of peanut butter supplied each month. Determine the inverse supply function for an individual seller. Determine the slope of the supply curve for peanut butter. Determine the new vertical intercept of the individual peanut butter supply curve if the hourly wage were to rise to $30 from $20. FP'N.' Question Three (31 A household monthly demand for peanut butter is given by the equation (23,, =10 0.8 PM + 0.041- 0.20 p], where di equals the amount of peanut butter demanded each month, PM equals the price of peanut butter, per unit. [equals household monthly income, and PJ-dequals the price ofjelly, per unit. Assume that household income is $4,500 and the per unit price of Jelly is $25.50. The market consists of 1,000 identical households with this demand function. 1. Determine the market aggregate demand function. 2. Determine the inverse market demand function. 3. Determine the slope of the market demand curve. Question Four (41 In the local market for peanut butter, the aggregate demand is given by the equation 05,, = 10,000 800 pM + 401- 200 PM and the aggregate supply is given by the equation Qid = -700.5 + 400.5 PM -50.5W where QM is amount of peanut butter demanded, PM is the per unit price of peanut butter, [is household income, Wis wage rate paid to peanut butter laborers, and 1de is the per unit price ofjelly. Assume I is $4,500, W is $20, and de is $25.50. Determine the equilibrium price and quantity of peanut butter in this local market. Question Five (51 In the local market for peanut butter, the aggregate demand is given by the equation di = 460 50 PM and the aggregate supply by the equation 0;, = -126 + 30 de 1. Determine the amount of excess demand or supply if price is $5. 2. Determine the amount of excess demand or supply if price is $8. Question Six (6! A market demand and supply functions are given by the equation Q"1 = 200 2P Q5 = -200 + 5P Where Qd is market demand; Q5 is market supply Determine the value of consumer and producer surplus if price is equal to 50. Question Seven (7) Michael's monthly demand for peanut butter is given by the equation (23d =10 0.8 PM + 004/- 020 pm where 03,, equals the amount of peanut butter demanded each month, [equals the Michael's monthly income, de equals the per unit price of peanut butter, and 1de equals the per unit price of jelly. Assume that the per unit price of peanut butter is $20.25, Michael's income is $4,500, and the per unit price ofjelly is $25.50. 1. Determine the value of own-price elasticity of demand for peanut butter. 2. Determine the income elasticity of demand for peanut butter. 3. Determine the cross-price elasticity of demand for peanut butter with respect to the price of jelly