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Quiz 3-10 - or stay the same Price will increase c(4 points...

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Econ 302 Quiz 2 McLeod Name _______________________________ ID # _______________________________________ 1. (8 points) Calculate the price elasticity of demand for each of the following situation: a) Demand is given by Q = 50 – 2P, and P = 20. -4 b) Demand is given by Q = 80 – 5P, and P = 6. -3/5 or -.6 2. (8 points total) a) (2 points) Suppose the demand for a good is given by Qd = 140 – 5P, and the supply of the good is given by Qs = -60 + 3P. If the actual price of the good is $20, is there a surplus, a shortage, or is the market in equilibrium? Shortage b) (2 points) Based on your answer given above, will the price of the product increase, decrease,
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Unformatted text preview: or stay the same? Price will increase. c) (4 points) What is the equilibrium price and equilibrium quantity in this market? P* - 25; Q* = 15 3. (4 points) What will happen to the equilibrium price and quantity of a good if: a) The price of a substitute good increases? This will cause the demand for the good to increase which will cause P* and Q* to both increase. b) There is a decrease in the number of firms which sell the good? This will cause a decrease in supply which will cause3 P* to increase and Q* to decrease....
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