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Unformatted text preview: P: e=P^(-2)*[P/(1/P)] = P^(-2)*P^2 = 1. Thus the curve is everywhere unit elastic. b) Q=100-P P=20 Q= 80. -1/slope is simply the coefficient on P in the demand function which in this case is -1. Thus we have e= -1/-1*20/80= . c) Q=100-2P e=1 1= -1/slope *P/Q. We know the 1/slope term is just the coefficient on P which is -2. e=1=2*P/Q. Multiply through by Q to ger Q=2P. But we know from the demand equation that Q also equals 100-2P. Thus 100-2P = 2P so 4P=100 and P=25 Q= 50. 4) see solutions to PS2 #1 and substitute the values for prices and income in. The solution will be exactly the same....
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- Winter '09