Problem 2 - c. If due to a wage increase in the...

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EC 11. Principles of Macroeconomics Jose U. Mora Problem on Elasticities of Demand and Supply Due on Thursday, Sept 27. Assume that the demand and supply function for Wheat are given by: Qd = 1250 – 3P and Qs = 150 + 3P. (Show your work algebraically and graphically) a. What is the price that clears the market? How many units of Wheat are sold at that price? b. How much would producers collect in revenue at the market clearing price?
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Unformatted text preview: c. If due to a wage increase in the agricultural sector the supply function changes to Qs = 100 + 3P, determine the new equilibrium price and quantity. d. Compute the corresponding midpoint price elasticity between the two equilibria (Hint: Demand or Supply price Elasticity?)...
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