Show step by step how you obtained your final result. Explain the economic meaning of the numerical responses.Submit on or beforethe due date for these exercises.

Exercise 1

Suppose that we have the following demand and supply functions.

Q_X= 100 - 0.4P_X

Q_X= 40 + 0.2P_X

a.What is the equilibrium market price for product X

b.What is the equilibrium quantity demanded and supplied

c.Government imposes a price floor of $120. Analyze the impact of this floor on price, quantity demand and supplied. Would this price floor produce a surplus or scarcity of this product in the market?

Exercise 2

Suppose you have the following hypothetical demand or sales function.

Qx= -4Px+2Py+0.20I+0.04A

and

PX = $200, (price of good X)

PY =$230,(price of good Y)

I = $1,500 (disposable per capita income)

A =$12,000 (advertizing expenditures)

a. Write out a reduceddemand function

b. Solve forand write out thedemand curve equation

c. Give a narrative interpretation for the coefficient of I

d. How could we classify good X and good Y? Explain why.

e. Calculate expected sales.

f.Find the totalrevenue function

gFind themarginal revenue function

hWhat output level maximizes total revenue