State Of The Wine Industry
Added on 2020-01-07
7 Pages1318 Words249 Views
PRICE THEORY03
Q1. Determine homogeneity and heterogeneity using demand functionsIn the given case two firm is given such as Alpha Vineyard and Beta winery who areselling theory wine bottles to satisfy all the needs and the expectations of various customersexists in the external business environment. Two equation is given to reflect the performance ofboth the firms is given as below:Alpha vineyard'sBeta WineryQA= 200-PA+PBPA= 200-QA+PBMCA=$20 per bottleFCA= $6000QB= 9000-100PB+40PAPB=McB= $10per bottle of wineFCB= $10000Total quantity demandedQ= (9000+200)+39PA-99PBThe above principles and equation of demand function states that firms will set their prices for allthe homogeneous products which equalizes PA+PB that form another equation such as PA=PBand Q= 9200-60P.Q2. Find Alpha vineyard's best response functionDemand function= Q= 9200-60PInverse demand function= P= 153.33- 0.017QBest response function for Alpha vineyard'sa= 153.33 b=0.017Marginal cost=$20 per bottle 153.33-0.017(q1+q2)-60q1-20= 0Q3. Find Beta Winery's best response functionDemand function= Q= 9200-60PInverse demand function= P= 153.33- 0.017QBest response function for Alpha vineyard's03
a= 153.33 b=0.017Marginal cost=$10 per bottle 153.33-0.017(q1+q2)-60q1-10= 0These two demand functions are based on a common equation as both the equationsremains the same as it is based on a common inverse demand functions. Basic variations lies inboth these situations of Alpha vineyard and Beta winery is the variable costs per unit incurred byboth the enterprises includes $10 per bottle and $20 per bottle differentiates the overall outputgenerated by an entity in the near future.Q4. Determine the price to be charged by the firm in the situations of equilibrium and alsoascertain the amount of bottle sell by firm to earn profit.Equilibrium price for Both the firms such as Alpha vineyard's and Beta Winery located inthe similar market of perfect competition who sets same prices for their homogeneous productsoffered to the variety of customers located in the external business environment in order to gaintheir trust and confidence in achieving desired aims and targets in less period.P= 153.33- 0.017QMC= c(q1+q2)= 2(q1+q2)R1(q1)= (153.33-q1)q1= 153.33q1-q1²MR1= R1(q1)= 153.33-2q1MR1= 153.33-2q1= 2(q1+q2)q1= 38.33-q2/2q2= 153.33/3=51.11Quantity of bottles of wine sold by Alpha and beta in the equilibrium situationq1= 38.33-q2/2= 38.33-(153.33/3)/2= 38.33/3≈12.77q1= 38.33/3, q2= 153.33/3Equilibrium pricesP= 153.33 -q1= 153.33-38.33/3Alpha vineyard's= 421.66/3≈140.55Beta Winery = 153.33 -153.33/303
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