Managerail Economics - Research Paper Example

Obviously C&D and E&F are smaller than A&B. 2. The cross price elasticity of demand measures the responsiveness of the demand for one good to a change in the price of another good (Mankiw). In the assignment, products A and B are substitutes since the cross-price elasticity is postive, at +3.6. Products C and D with cross price elasticity of 5.4 are also substitutes. When the cross price elasticity is positive,it means that the demand for product 1 increases as the price of the other good increases,threfore they are substitues.

MU of prod A/price of prod A = MU of prod B/price of prod B = MU of prod C/price of prod C = MU of prod D/price of prod D = MU savings/price savings, which is equal to 36/$18 = 12/$6 = 8/$4 = 2/$1. The marginal utility divided by the price is equals to 2. 4. What are given: Income from pottery sales = $ 72,000Costs:Helper = 12,000/ year yield on the $40,000 if invested = $4000/yearRent = 5000/year salary as a potter = $15,000/yearMaterials = $ 20,000/yearEquipment = $40,000 Entrepreneurial Talent = $3000Acccounting profit (1st year)= $72,000 - 12,000 - 5000 - 20,000 -40,000 = -5000On the 2nd year if there is no purchase of equipment = $72,000 - 12,000 - 5000 - 20,000 = $35000Economic profit = $72,000 - 12,000 - 5000 - 20,000 -40,000-3000-4000-15,000= -$27,000On the 2nd year if there is no purchase of equipment = $72,000 - 12,000 - 5000 - 20,000 -3000-4000-15,000 = $13000Referenceshttp://www.

crawfordsworld.com. 23 April 2010 .Mankiw, N. Gregory. Principles of Macroeconomics. 3rd. South-Western College Publishing,