b) Given the following demand and supply functions as; Qd = 500-3p Gs = -100+5p i)Find the price elasticity of demand and price elasticity of supply at the equilibrium point. ii)Based on the values obtained from Price elasticity of supply in (i) above, what advice would you give to the producer if he is to increase revenue? iv)Using illustrations, distinguish between Minimum and maximum price v)Assuming the government, set the price at 45shs, determine whether its minimum or maximum price, and state the surplus or deficit

b) Given the following demand and supply functions as; Qd = 500-3p Gs = -100+5p i)Find the price elasticity of demand and price elasticity of supply at the equilibrium point. ii)Based on the values obtained from Price elasticity of supply in (i) above, what advice would you give to the producer if he is to increase revenue? iv)Using illustrations, distinguish between Minimum and maximum price v)Assuming the government, set the price at 45shs, determine whether its minimum or maximum price, and state the surplus or deficit

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

See similar textbooks

Similar questions

In a particular market, demand and supply curves are defined by the following equations: P=50 – 0.5QD QS= -20 + 2P where, P is the price in pounds, QS is the quantity supplied and QD is the quantity demanded. (a) What is the equilibrium price and quantity? (b) What is the price elasticity at a price of £35? (c) What do you expect will happen to total expenditure on this good if the price increases from £35 to £40? Is this expectation confirmed if you calculate the total revenue for each price?
Suppose the demand for bicycles is given byQp = 10,000P- and the supply of bicycles is given by Qs = 0.01P3. (a) Using calculus and the given supply and demand curves, find mathematical expressions for the elasticities of demand and supply as a function of the price. Use these expressions to demonstrate that both curves have constant elasticity along their entire length. (b) Find the equilibrium price and quantity in this market mathematically.
Suppose the supply and demand curves for a particular product are given by: QS = -20 + 2P QD =100 - 2P where QS and QD are quantities in units and P is the price per unit. (b) Calculate both the demand and supply elasticity around the equilibrium point. [Hint: you can use either the point method or the average arc (midpoint) method.] [5]
A: Suppose the initial demand at the price of $10 was 100. When the price rises to $12, the demand drops to 30. Find the price elasticity of the demand. Is the demand elastic or inelastic in this price range? Will the revenue increase or decrease as the result of this price change? Justify your answer. B:. Using calculus, calculate the price elasticity of the following demand functions: D(p)=10-2ln(p) and D(p)=7p -3 . C: Suppose now that the demand is D(p)=12-3p. At what price is the revenue maximized? What is the maximum revenue? What is the price elasticity of demand at this price?
Worldwide annual sales of smartphones over a two year period were approximately q = -5p + 3,090 million phones at a selling price of $p per phone. (a) Obtain a formula for the price elasticity of demand E. E = (b) In one of the years the actual selling price was $315 per phone. What was the corresponding price elasticity of demand? (Round your answer to two decimal places.) E = Interpret your answer. The demand was going ---Select--- O by about % per 1% increase in price at that price level. (c) Use your formula for E to determine the selling price that would have resulted in the largest annual revenue. $ What would have been the resulting annual revenue? (Round your answer to two decimal places.) $ billion
Suppose Atlantic air travel in business class has an estimated elasticity of demand of0.40 while Atlantic air travel in economy class, with an estimated price elasticity of 1.62. And the price elasticity of supply is 1.5 at market equilibrium. As a result of an increase on fuel tax on the seller, the new equilibrium price rises by 20%.(a) What is the percentage change in quantity demanded of air travel in both classes? Show your calculations.(b)Explain with 2 relevant diagrams, what will happen to total revenue in the air travel industry? (Hint: Consider the slope of demand and supply curves)
Consider the demand function for bicycles in South Florida: Q = 24 + 3Y – 1.2P where: Q is quantity demanded, Y is monthly income, and P is the price per unit. If/when P = $54, and Y = $2,300, (a) Find the quantity of bicycles that would be sold. (b) Calculate the amount of the seller's total revenue. (c) Compute the price-elasticity of demand (Ep) for bicycles. (d) Interpret your result in (c). (e) Compute the income-elasticity of demand (Ey) for bicycles. (f) Interpret your result in (e).
Suppose that the price elasticity of demand for good q is constant and equal to -1. When the price of q is $15 per unit, the total amount demanded is 600 units. If the supply is perfectly inelastic at 150 units, the equilibrium price (p) and the equilibrium quantity (q) is (a) p = 20, q = 50 (b) p = 40, q = 100 (c) p = 60, q = 150 (d) p = 80, q = 200 (e) None of the above.
Worldwide annual sales of smartphones over a two year period were approximately g = -6p + 3,060 million phones at a selling price of $p per phone. (a) Obtain a formula for the price elasticity of demand E. E = (b) In one of the years the actual selling price was $355 per phone. What was the corresponding price elasticity of demand? (Round your answer to two decimal places.) E = Interpret your answer. The demand was going ---Select-- v by about |% per 1% increase in price at that price level. (c) Use your formula for E to determine the selling price that would have resulted in the largest annual revenue. $ What would have been the resulting annual revenue? (Round your answer to two decimal places.) 2$ billion
Investigating the demand for textile in a country X, a researcher observed that the demand for textiles tend to rise by 1.5 per cent with one per cent decrease in the prices of textiles; with the rise in one per cent of per capita GDP, the demand for textiles rise by 0.45 per cent and when food prices increased by one per cent, the demand for textiles contracts by 0.93 per cent. (a) Identify the type of demand elasticities in this case and define them. (b) Which type of elasticity the textile mills should consider significant for business development? (c) How much rise in sales is expected during a festival season by offering 20 per cent discount by textile mills showrooms?
Worldwide annual sales on smartphones over a two year period were approximately q=-4p+3,020 million phones at a selling price of $p per phone. (a)obtain a formula for the price elasticity of demanding e. E=_____ (b) in one of the years the actual selling price was $305 per phone. What was the corresponding price elasticity of demand? E=_____ What would’ve been the resulting annual Revenue? $_____billion
Demand for Magnum Ice Cream is given by an equation as Q = 70 – 10P + 4 Px + 50 I Where, Q = Quantity of Magnum demanded, P = Price of Magnum Ice Cream, Px = Price of Walls Ice Cream, I = Per Capita Incomea. Assume P = Rs 100, Px = Rs 120 and I = Rs 25 (Rs in thousands). Calculate (i) Price Elasticity of Demand(ii) Cross Price Elasticity of Demand(iii) Income Elasticity of Demand