Unformatted text preview: P D = 10 – 2Q; P S = 4 + 1.5Q (a) What are the equilibrium price and quantity? (b) What are the equilibrium price and quantity if demand increases by 2 units at each price? ( Hint: To find the new demand curve rewrite demand equation as: Q = 5 – 0.5P. Notice that this equation gives Q for each price level P. The new Q is 2 more than this old Q for each price level. So the new equation is: Q = 7 – 0.5P .) 4. Consider demand Q D = 10 – 2P. Where is the price elasticity of demand equal to -1? 5. Suppose the demand curve for a product is given by Q = 10 – 2P + P s , where P = price of the product and P s = price of substitute good = $ 2.00. Suppose P = $ 1.00. What is the price elasticity and cross price elasticity of demand?...
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- Winter '09
- total market demand, nonprice sensitive consumers, demand function. Note