Econometrics

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User Generated
Subject
Economics
Type
Homework
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Question 1
a)
Market level supply function:
At P>10,
=P+5
is the market supply.
=26
=26(P+5)
=26P+130
At P<10,
=0
It implies,
=0
At P=10,
= (0 to 15)
=26(0 to 15)
=0 to 390
Market supply function
(P):
=26P+130 (P>10)
=0 (P<10)
=0 to 390 (P=10)
b)
At P=10,
=0 to 390

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=850-10(10) =850-100=750
Quantity demanded is more than quantity supplied (maximum
=390).
P=10 is not an equilibrium price.
At P=0,
=850
At P=9,
=760
From price 0 to 9, quantity demanded ranges from 850 to 760. However, at price less than 10,
=0
Hence, P<10 is also a non-equilibrium price.
It implies, equilibrium will be achieved at P>10.
=26P+130
=850-10P
=
26P+130=850-10P
36P=720
P=20
At P=20,
=
=850-10(20) =650
Equilibrium price=20
Equilibrium quantity=650
=650
=


=25
c) S represents supply curve, and D represents demand curve.
Firm level:

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Question 1 a) Market level supply function: At P>10, 𝑞 𝑠 =P+5 𝑄 𝑠 is the market supply. 𝑄 𝑠 =26𝑞 𝑠 𝑄 𝑠 =26(P+5) 𝑄 𝑠 =26P+130 At P10) 𝑄 𝑠 =0 (P ...
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