1
Introductory microeconomics ECON1001_2010
Tutorial 3
Week 4
1. The demand and supply of widgets is described by the following functions:
Q
D
= 700 -100P
Q
S
= -100 +100P
Represent the demand and supply model in (Q, P) space diagram. Calculate the
equilibrium quantity and price of widgets. Suppose the advent of computers improves
production of widgets. How would the supply function be affected? Calculate the
equilibrium price elasticity of demand and supply.
Q
*
= 300, P
*
= 4; Elasticity: Demand = 4/3 abs; Supply = 4/3 abs.
2.
a)
For the demand functions, (i) P = a –bQ, (ii) Q = c – dP, derive expressions for
price elasticity of demand in terms of Q only.
P = a –bQ: E
D
= 1- (a/b) x (1/Q)
Q = c – dP: E
D
= 1 – c/Q
b)
Calculate the elasticity of demand for each of the following functions at Q =
100; 500; 900.
(i)
Q = 1800 – P
E
D
= (1 – 1800/Q) = 17abs; 2.6abs; 1abs
(ii)
P = 60 – 0.5Q
E
D
= (1 – 120/Q) = 0.2abs; 0.76abs; 0.867abs
c)
Given the demand function P = 60 – Q
2
, calculate the price elasticity of
demand at P = 44.
E
D
= - P/2(60-P);
η
(44) = - 44/2(60-44) = 1.375 abs.

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