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supply_demand_pract

supply_demand_pract - P D = 10 – 2Q P S = 4 1.5Q(a What...

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UBC COMM 295 Practice Problems #1 SUPPLY AND DEMAND 1. Suppose there are two types of consumers in the market for computers: price sensitive  and non-price sensitive. The demand of price-sensitive consumers is given by P = 100  – 3Q and that of non-price sensitive consumers is given by P = 120 – 6Q.  a. Draw a diagram of the two demand functions. b. Find the total market demand function.  ( Hint: Solve the demand equations for Qs and then add the two Qs to find the total  demand function. Note that this demand function is valid for 0 < P < 100. For 120 > P >  100, the market demand is that of non-price sensitive consumers only. ) 2.  In a crude oil market, there are two big suppliers each with supply function given by  P = 2Q and 4 small suppliers each with supply function given by P = 4Q. What is the  market supply function of crude oil?     3. Consider a competitive market with the following demand and supply curves:
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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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