Unformatted text preview: 2 K 0.5 . Elasticity of supply when P = 10 and K = 25? Q=25P 2 dQ/dP = 50P. (dQ/dP)(P/Q) = 50P(P/25P 2 ) = 50/25 = 2. The exponent is the elasticity at every point. 6. Supply function shift up by 50 percent. Price of eggs rises and quantity of eggs fall. 7. Costs shift up by 50 percent and the supply elasticity is 1.0; price of eggs up by 25 percent, what is the elasticity of demand for eggs? τ = 50%, the shift in supply. dP/d τ = η/(ηε29 = ε =  1 (equation 2.28) 8. The demand and supply curves for cheese are Q d = 110 – 50P and Q s = 10 +50P. a. What is the market price and equilibrium quantity? Q d = Q s => P = 1; Q = 60. USDA buys cheese for a price of $2.00. b. What is the new price of cheese? New price $2.00. USDA demand is horizontal at that price. c. How much cheese will be produced? How much will be bought privately? Q s = 10 + 50(2) = 110; Q d = 110 – 50(2) = 10. USDA takes 100 and must dump it somewhere outside this market....
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This note was uploaded on 04/20/2010 for the course ARE 100A taught by Professor Constantine during the Fall '08 term at UC Davis.
 Fall '08
 CONSTANTINE

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