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Homework 2.
Name _______________________________________
Due 9/25/05
Row ____________
1)
8 points total.
Quantitydemanded = 400 – 2 * Price
and Quantitysupplied = 100 + 4 * Price
Solve for Price and Quantity at Equilibrium.
2) (6 points total, 3 points each)
If the price of shrimp is $5 a pound, consumers buy 1000
pounds a day.
If the price increases to $6 a pound, the quantity demanded falls to
900
pounds
per day.
a)
Starting from the initial point, calculate the elasticity of demand _______________
b)
Is demand elastic or inelastic at this point?
________________________________
3) (6 points total, 3 points each)
If the price of beef is $3.00 a pound, consumers buy
600
pounds a day.
If the price falls to $2.50 a pound, the quantity demanded rises to 1000 pounds per
day.
a)
Starting from the initial point, calculate the elasticity of demand _______________
b)
Is demand elastic or inelastic at this point?
________________________________
4)
Fill in the blanks
(10 points total, 2 pts each)
:
a) If the elasticity of supply is 1.9, a 1% increase in price will cause a
_________________
in quantity supplied.
b) If the elasticity of supply is 2.0, a 5% decrease in price will cause a ________________ in
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 Fall '08
 Duffy,P

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