Question

i) P = 40 – 0.5Q                     ii) Q = -4 + 0.75P                &nbs

i) P = 40 – 0.5Q                     ii) Q = -4 + 0.75P                   iii) 4Q + 4P = 64

a) Calculate price elasticity of demand or supply using the point elasticity formula for the functions (i), (ii), (iii) when P=8 and when P=6.

b)Calculate the price elasticity of demand using the mid-point formula between P=6 and P=8 for (i).

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Homework Answers

Answer #1

a. (i) When P= 8, Q= 64

When P=6, Q= 68

Point elasticity of demand = = (4/-2) *(8/64)= -1/4 = -0.25

(ii) When P=8, Q= 2

When P=6, Q= 0.5

Point elasticity of supply =   = (-1.5/-2) * (8/2) = 3

(iii) When P=8, Q= 8

When P=6, Q= 10

Point elasticity of demand = = (2/-2) * (8/8) = -1

b. (i) Price elasticity of demand using mid point formula

E= = [4/66] /[-2/7] = -0.21

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