given Qd = 25-P and Qs=4p
it also says if price is at $10 and $2 compared to p* find the
amount of surplus and shortage, which i have already done
ive figured out p* is 5
and surplus would be 5$ at $10 and $3 shortage at $2
I need to find the price elasticity of both demand and supply.
|
P |
Qd |
Qs |
|
2 |
23 |
8 |
|
10 |
15 |
40 |
Elasticity of demand = %change in Qd/%change in P
= ((15-23)/23)/((10-2)/2) = -0.087, inelastic in demand as the value is less absolute value of 1
Elasticity of supply = %change in Qs/%change in P
= ((40-8)/8)/((10-2)/2) =1, unitary elastic in supply as the value is equal to absolute value of 1
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