Progress Exercises 2.

1. The equation of a line is given by y = 50 - 0.6x

(a) deduce the equation of the line when translated horizontally forward by 12 units.

(b) deduce the equation of the line when translated horizontally backwards by 5 units.

(c) deduce the equation of the line when translated vertically down by 6 units.

What is the size and direction of the corresponding horizontal shift?

2. A supply function is given by the equation P = 10 + 3Q

(a) When a tax of 1.5 per unit is imposed the supplier receives (P - 1.5) per unit. Write
down the equation of the supply function, adjusted for tax. What is the size of the
vertical and the corresponding horizontal shift?

(b) Plot the supply function for the good with and without tax. Compare the graphs.

3. Assume that the demand function for good X is given as:

Q  200  2 P  0 .02Y  0 .3PS  0 .5PC  0 .04T  0 .05 A
where Y = 1000, Ps = 10, Pc = 14, T = 50 and A = 40.

(a) Analyse the effect on the demand for good X if the price of the substitute good to
X increases in price from £10 to £30. Illustrate your answer algebraically and
diagrammatically.

(b) Analyse the effect on the demand for good X if the price of the complementary
good to X increases in price from £14 to £35. Illustrate your answer algebraically and
diagrammatically.

4. The supply function for toolboxes is given by P = 100 + 0.4Q. Deduce the equation of
the new supply function when,

(a) a subsidy of £5 per unit is introduced. (b) a tax of £10 per box is imposed.

Calculate the price charged when the quantity demanded is 50, according to,
(i) the original supply function. (ii) with the subsidy (iii) with the tax.

© John Wiley and Sons 2013

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