Asked by Deneatra Caesar on Jun 14, 2024
Verified
Suppose that the inverse demand function for wool is p A/q for some constant A.Suppose that 1/4 of the world's wool is produced in Australia.
a.If Australian wool production increases by 1% and the rest of the world holds its output constant, what will be the effect on the world price of wool?
b.How does the marginal revenue to Australia from an extra unit of wool relate to the price of wool?
World Price
The international market price at which goods are traded between countries.
Marginal Revenue
The additional income earned from selling one more unit of a good or service.
Wool Production
The process of breeding, raising, and shearing sheep to obtain wool, a natural fiber used in textiles.
- Comprehend the fundamental principles of demand and supply within the field of economics.
- Gain insight into the idea of marginal revenue and its linkage to pricing strategies.
Verified Answer
NE
Narjes ElkheshenJun 20, 2024
Final Answer :
a.Price will fall by about 0.25%.
b.Marginal revenue is 75% of price.
b.Marginal revenue is 75% of price.
Learning Objectives
- Comprehend the fundamental principles of demand and supply within the field of economics.
- Gain insight into the idea of marginal revenue and its linkage to pricing strategies.