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Assignment 1 - Economics

This document summarizes an assignment for a managerial economics course. It includes the following: 1) A question about how demand for Sony TVs would change given different scenarios involving prices of other brands and economic factors. 2) An equation modeling demand for a product X based on its price, consumer income, and price of a related good Y. 3) An analysis of the demand equation which indicates X is an inferior good and X and Y are substitutes.

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Nana Salem
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55 views

Assignment 1 - Economics

This document summarizes an assignment for a managerial economics course. It includes the following: 1) A question about how demand for Sony TVs would change given different scenarios involving prices of other brands and economic factors. 2) An equation modeling demand for a product X based on its price, consumer income, and price of a related good Y. 3) An analysis of the demand equation which indicates X is an inferior good and X and Y are substitutes.

Uploaded by

Nana Salem
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Managerial Economics

Assignment No. 1

Dr. Fakhry Eldin Elfiky

Name: Group:

Mahmoud Mohamed Raafat C ( MBA )

1. What happens to the demand for SONY color television sets when each of the following happens: A. the price of Mitsubishi TVs rises - The demand will increase for SONY color television B. the price of SONY TVs rises - The demand will decrease for SONY color television C. personal income falls - The demand will decrease for SONY color television D. dramatic price reductions occur for video recorders - The demand will increase for SONY color television E. Government imposes tariffs on Japanese TVs beginning next year - The demand will increase for SONY color television

2.

Suppose the demand for a product (X) can be expressed as a function of its price (Px ), consumer monthly income (I), and the price of a related good Y (PY ) QX = 180 - 10 (Px) - 0.2 (I) + 10 (PY)

A. Interpret the slope coefficient on Px There is an OPPOSITE relationship between (Px) and (Qx) , if and only if we hold other factor constant . The slope of (Px) is (-10) So if the ( Px ) increase by ( $1 ) that means the ( Qx ) will decreased by 10 units Also if the ( Px ) decreased by ( $1 ) that means the ( Qx ) will increase by 10 units Ex.: QX = 180 - 10 (5) = 130 unit QX = 180 - 10 (6) = 120 unit A CHANG IN ( Px )ONLY WILL CAUSE A MOVEMENT ALONG THE SAME (D) CURVE

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B. Is good ( X ) a normal or inferior good? Explain. ( X ) is an inferior good When the income increase the demand will decrease ( the sign for income is (- )

C. Are goods ( X ) and ( Y ) substitutes or complements? Explain. Goods ( X ) and ( Y ) are substitutes When ( Py ) increase the demand will increase for good ( X ) and vice versa

D. Forgetting income (I) and the price of a related good (Py), how much consumer surplus exists in this market if the price of X were $10? QX = 180 - 10 (Px) y If (Px)= 0 Qx = 180 10(0) = 180 y If (Qx)= 0 Px = (180 Qx)/10 = (180 y If (Px)= 10 Qx = 180 10(10) = 180

0 )/10 = 18

100 = 80

P 18
Consumer surplus

10

80
Consumer surplus = 0.5 v (18

180
10) v 80 = $ 320

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