Q3.

It is known that the number of lunches

demanded is 80 units when the price is £5
and 45 when the price is £12. Given that
the relation between price and demand is
linear:
(a) Determine the equation of the demand
function in the form Q = f (P). Plot the
graph of the demand function.
(b) Use the equation of the demand
function to calculate the change in demand
when the price (i) increases by £3, (ii)
decreases by £2.
(c) Estimate the decrease in price for each
lunch when the number of lunches
demanded (quantity demanded) increases
by 15.

4.In a given region, the number (000s) in

the population aged 60 and over is
expected to grow according to the equation
P = 125.5e^0.012t, where t is given in
years
(a) If t = 0 at the beginning of 1995,
calculate the numbers at the beginning of
1995.
(b) Calculate the numbers in the
population at the end of 10, 30, 60, 90, 100
years.

5.The demand function for a monopolist is

Q = 120–3P.
(a) Find expressions for TR, MR and AR.
Evaluate TR, MR and AR at Q = 15. Hence
explain in words the meaning of each
function at Q = 15.
(b) Calculate the value of Q for which AR
= 0. Calculate the value of MR when AR =
0.
Is it sensible for a monopolist to sell this
value of Q?

5.A firm has the following average cost

function:
10
AC  50 
Q
(a) Show by differentiation that AC
decreases indefinitely as Q increases. Give
an economic interpretation of this
phenomenon.
(b) Write down the equation for total cost.
Hence, write down the equation for total
variable cost and average variable costs.
State the value of fixed costs.
(c) Write down the equation for marginal
costs. Comment on the relationship
between TC and MC in this example.

6.A monopolist faces a demand function P

= 152.5 - 3Q and has costs given as
TVC  Q  15Q  175Q TFC = 300
1
2 2

(a) Write down the equations for TC, TR

and  .
(b) Find the output, Q, at which profit is
minimised and maximised.
(c) Confirm the condition MC = MR for
maximum profit.