The demand equation for good D is given by the following equation:

QD=502PD0.001RQD=502PD0.001R

o PDPD is expressed in dollars per kilo, R is expressed in dollars and QDQD in kilos.

Suppose that R=10000$R=10000$ and PD=10$PD=10$.

Questions:

1)What is the quantity demanded of good D?

2)Graphically represent the demand curve for good D. The graphic representation must be precise

3) Take your graph again and represent the consumer surplus when PD=10$PD=10$.

4) A friend asks you to explain to her what this surplus represents. What explanation would you give it using the graph you plotted? Your explanation should be based on reading the graph you presented in question 20.

5)Calculate the price elasticity of demand for good D.

6) Give an economic interpretation of your result in question 23.

7)What impact would a price increase have on consumer spending on this good? Justify your answer.

8)Calculate the income elasticity for good D. What do you conclude about the nature of the economic relationship between the two goods? (5 points, including 2 points for the nature of the relationship)

9)Would the interpretation of your result have been the same if R=12000$R=12000$? Give an explanation without doing calculations.

Answer rating: 100% (QA)

1 To find the quantity demanded of good D we can substitute the given values into the demand equation QD 502PD0001R QD 502 100001 10000 QD 502 104713 10000 QD 5238655 kilos Therefore the quantity dema... View the full answer