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Unformatted text preview: quantity of surfboards is 600 boards/week, that the elasticity of demand for surfboards is 2, and that the elasticity of supply is +1. If the government imposes a price ceiling of $400, what will be the resulting level of excess demand? 5. What is the most you can say about the relationship between the elasticity of demand at point A, point B and point C? A B C P Q D 1 D 2 6. Let the supply curve for gasoline be given by Q=3/2P-3 , and let the demand curve for gasoline be given by Q=5-1/2P . a. Sketch the supply curve and the demand curve. b. Compute the equilibrium price and quantity of gasoline, and label these on your graph. c. Suppose that President Bush allows companies to drill for oil in the Arctic National Wildlife refuge. How will Bushs new policy affect the equilibrium price and quantity of gasoline? d. Given President Bushs new policy, will total revenues increase or decrease for gasoline suppliers? Explain....
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- Winter '08
- Price Elasticity