wk1 practice question ans

wk1 practice question ans - The Colorado College Department...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 The Colorado College Department of Economics and Business Block 7 Econ 207 Practice Question set 1 ans. 1. (a) Q=6000 – 2000P = 6000- 2000(2) = 2000. (b) Q=6000 – 2000P To sell 5000 bumper-stickers the price charged can be obtained by substituting Q=5000 in the demand function. 5000=6000-2000P 2000P= 1000 P =$0.50 (c) Q=6000 – 2000P For sales to be zero we put Q=0 0=6000-2000P P=$3. (d) Q=6000 – 2000P To give away the stickers free implies P=0 Q=6000-2000(0) Q=6000. (e) The point price elasticity of demand at a price of $1 is calculated as follows: Q P Q P P Q e 2000 - = = At price of $1, Q=6000 -2000(1) = 4000. Using this in the elasticity formula above, 5 . 4000 1 2000 2000 - = - = - = = Q P Q P P Q e 2. (a) To determine equilibrium price we set Q d =Q s 1600-125P=440+165P 1160=290P P*=$4 To obtain the equilibrium quantity we substitute the value of P in either the demand or supply function. Q* =1600 - 125($4) = 1100 .
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 (b) To obtain price elasticity of demand we use the demand function to first compute P Q d Here P Q d = -125. 454 . 0 11 5 1100 4 125 - = - = - = = Q P P Q e d pd To obtain price elasticity of supply we similarly use the supply function to first compute P Q s Here P Q s = 165. 6
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 04/19/2008 for the course EC 207 taught by Professor Ghosh during the Spring '08 term at Colorado College.

Page1 / 4

wk1 practice question ans - The Colorado College Department...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online