Posted by **Emma** on Sunday, May 2, 2010 at 2:56pm.

Suppose there are two goods. The demand for good 1 is q1=a-bp1+ep2 and the demand for good two is q2=a-bp2+ep1.

a and b are strictly positive, |e|<b

(1)Compute the optimal prices, and the Lerner index and inverse elasticity of demand for each good.

(2)Now suppose the goods are produced by two firms that choose prices simultaneously. Compute the Nash equilibrium and compare it to the answer in part (1)

## Answer This Question

## Related Questions

- economics - Suppose there are two goods. The demand for good 1 is q1=a-bp1+ep2 ...
- Economics- please check - Please check to see if my answers are correct. ...
- economics - 1.. Suppose that U(x; y) = min(x; y) with px = 1 and py = 1. ...
- economics - suppose the demand curve for a product is given by Q=10-2P+Ps1,where...
- Micro Econ - Some texts define a "luxury good" as a good for which the income ...
- economics - Two goods are complements when a decrease in the price of one good ...
- economics - 1. Chipo has the following utility function of 2 goods Pies (X) and ...
- economics - 1. Chipo has the following utility function of 2 goods Pies (X) and ...
- economics - 1. Chipo has the following utility function of 2 goods Pies (X) and ...
- Managerial economics - Suppose Nick produces to goods @ cost C(q1,q2)=1000=.5q1^...

More Related Questions