Question

Consider the following demand and supply curves: Qd = 200 – 2P and Qs = 20 + 4P. What are the equilibrium quantity and price? At that equilibrium what is the price elasticity of demand?

Answer 1

Date: Id = 200-2P Os = 20+up at equilibrium , Qd = Os 200-2P = 20+4P. 180 = 6l 1-30 &= 20+ 4x30 140 elasticity - do y z - - 2x30 = -0.43 140 equilibrium quantity /140 / equilibrium Pin & 1307 Price elasticily - 10:43

Answer 2

ANSWER :

Demand function :  Qd = 200 - 2P

Supply function : Qs = 20 + 4P

At equilibrium, Qd = Qs

So,

200 - 2P = 20 + 4P

=> 200 - 20 = 4P + 2P

=> 180 = 6P

=> P = 30 (currency unit)

=> Q = 200 - 2(30) = 140 pounds

So, equilibrium Price is 3 (currency unit) and equilibrium Quantity is 140 pounds.

(ANSWER).

From demand function :

Q =  200 - 2P

Differentiating w.r.t. P :

dQ / dP = - 2

Price elasticity of demand = (dQ/Q) / (dP/P) = dQ/dP * P/Q 

So, at equilibrium :

Price elasticity of demand = - 2 * 30/140 = - 3/7 = - 0.4286 (ANSWER)