4) Suppose that demand is given by Q = 1500 - 10P and supply by Q = 5P.
A) Find the equilibrium price and quantity. (6 pts.)
B) At the equilibrium price and quantity, find the price elasticity of demand and the price elasticity of supply. (6 pts.)
Answer
A)
equilibrium is at Qd=Qs
equating both equations
1500-10P=5P
15P=1500
P=100
Q=1500-10*100=500
the equilibrium price is $100 and the quantity is 500 units.
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B)
The elasticity of demand is -2.
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Price elasticity of supply is 1.
4) Suppose that demand is given by Q = 1500 - 10P and supply by Q...
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