Using the supply and demand equations given below: Demand Qd = 25 – 2P Supply Qs = 1 + P If the price falls from $8 to $7: a. Compute for the own price arc elasticity of demand. Provide an economic interpretation of your computed value (this is different from what is asked next) and classify the good according to the type of elasticity. b. Compute for the price elasticity of supply. Provide an economic interpretation of your computed value and classify the good according to the type of elasticity.
Using the supply and demand equations given below:
Demand Qd = 25 – 2P
Supply Qs = 1 + P
If the price falls from $8 to $7:
a. Compute for the own price arc
of your computed value (this is different from what is asked next) and classify the good according to
the type of elasticity.
b. Compute for the price elasticity of supply. Provide an economic interpretation of your
computed value and classify the good according to the type of elasticity.
1. What is the relationship between total revenue and own-price elasticity of demand?
2. Illustrate a situation when the producer of a good will have a greater tax incidence than a consumer.
What does elasticity have to do with tax incidence?
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