HW chap 2

Notethatthepriceelasticityofdemandisdefinedas

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

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