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Suppose the demand for cigarettes is Q = 15 – 0.5P and the supply of cigarettes...

  1. Suppose the demand for cigarettes is Q = 15 – 0.5P and the supply of cigarettes is Q = P – 3, where P is the price per pack of cigarettes.
  1. What are the initial equilibrium levels of Q and P?
  2. What are the elasticities of demand and supply at the equilibrium?
  3. Given the elasticity of demand at the equilibrium, if supply were to increase would total revenue in the market increase or decrease? Explain.
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