HW chap 2


Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ute the equilibrium P in Qd or QS to get the equilibrium quantity. Note that the equilibrium Qd = QS = 60(4)/(1 + 4). Note that the price elasticity of demand is defined as For the demand function considered in this question: Also, the equilibrium price is P = 60/(1 + 4), and the corresponding equilibrium quantity is Qd = 60(4)/(1 + 4). Therefore, at the equilibrium price P / Qd = 60/(1 + 4) / 60(4)/(1 + 4) = 1/4 Substituting the values in the price elasticity formula, note that for this demand and supply, the elasticity equals ­ 1 (60/(1 + 4) / 60(4)/(1 + 4)) = −1/4 = ­0.25. 3. awar d: 16.66 out of 16.66 points Consider the following demand and supply functions for corn: Demand is given by Supply is given by where P is the price in dollars and Q is the quantity in billions of bushels. Suppose the government needs to buy 5.6 billion bushels of corn for a third­world famine relief program. Instructions: Round your answers to 2 decimal places. a. What is the equilibrium price of corn before the government purchase? $3. 00 . b. What is the equilibrium price of corn after the government purchase? $3. 80 . rev is ed jrl 08­09­2011 e z to.mhe c loud.mc gr a w...
View Full Document

This note was uploaded on 01/14/2014 for the course ECO 3352 taught by Professor Ax during the Fall '13 term at Troy.

Ask a homework question - tutors are online