Question One (1)

Michael's monthly demand for peanut butter is given by the equation:

= 10 - 0.8 + 0.04I - 0.20

where equals the amount of peanut butter demanded each month, equals the price of peanut butter, per unit. I equals Michael's monthly income, and equals the price of jelly, per unit. Notice that the sign on the price of jelly 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 of jelly is $25.50.

1.Determine the amount of peanut butter demanded by Michael each month.

2.Given the values for I and , determine the inverse demand function.

3.Determine the slope of the demand curve for peanut butter.

4.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

= -70.5 + 40.5 -5.5W

where is the amount of peanut butter supplied each month, is per unit price of peanut butter in dollars, and W is 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 $20.1.Determine the amount of peanut butter supplied each month.

2.Determine the inverse supply function for an individual seller.

3.Determine the slope of the supply curve for peanut butter.

4.Determine the new vertical intercept of the individual peanut butter supply curve if the hourly wage were to rise to $30 from $20.

Question Three (3)

A household monthly demand for peanut butter is given by the equation

= 10 - 0.8 + 0.04I - 0.20

where equals the amount of peanut butter demanded each month, equals the price of peanut butter, per unit. I equals household monthly income, and equals the price of jelly, 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 (4)

In the local market for peanut butter, the aggregate demand is given by the equation

= 10,000 - 800 + 40I - 200 and the aggregate supply is given by the equation

= -700.5 + 400.5 -50.5Wwhere is amount of peanut butter demanded, is the per unit price of peanut butter, I is household income, W is wage rate paid to peanut butter laborers, and is the per unit price of jelly. Assume I is

$4,500, W is $20, and is $25.50. Determine the equilibrium price and quantity of peanut butter in this local market.

Question Five (5)

In the local market for peanut butter, the aggregate demand is given by the equation

= 460 - 50

and the aggregate supply by the equation

= -126 + 30

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

= 200 - 2P

= -200 + 5P

Where is market demand; 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

= 10 - 0.8 + 0.04I - 0.20

where equals the amount of peanut butter demanded each month, I equals the Michael's monthly income, equals the per unit price of peanut butter, and 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 of jellyis $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