Question

**QUESTION TWO**

Suppose that you are given the following demand and supply
functions, respectively:

Q_d=σ

Q_s=P

Where Q_d is the quantity demanded, Q_d is the quantity supplied, P
is the price, and σ is a non, negative integer.

**REQURED:**

- Determine the equilibrium price and equilibrium
quantity.
**[2 Marks]** - Draw a well labelled diagram showing (i)
above.
**[4 Marks]** - Find the price elasticity of demand at the equilibrium
point.
**[3 Marks]** - What is the nature of
elasticity?
**[1 Mark]** - Find the price elasticity of supply at the equilibrium
point.
**[3 Marks]** - What is the nature of
elasticity?
**[1 Mark]** - Suppose now that government subsidises consumers’ purchases by
*α*per unit. Suppose further that this subsidy goes directly to the consumers. Find the new level of equilibrium price and quantity.**[4 Marks]** - Draw a diagram showing (viii)
above.
**[3 Marks]** - Find the price elasticity of demand at the equilibrium point in
(vii).
**[2 Marks]** - Find the price elasticity of supply at the equilibrium point in
(vii).
**[2 Marks]****[TOTAL: 25 MARKS]**

Answer #1

Suppose the demand and supply for a product is given by the
following equations:
p=d(q)=−0.8q+150
(Demand)
p=s(q)=5.2q
(Supply)
For both functions, q is the quantity and p is the price.
Find the equilibrium point. (Equilibrium price and equilibrium
quantity) (1.5 Marks)
Compute the consumer surplus. (1.5 Marks)
Compute the producer surplus. (1.5 Marks)

Suppose demand and supply are given by: P = 125 - 4Qd P = 2Qs a.
Find equilibrium price and quantity. b. What is the effect of a
price ceiling set at P=20? c. What is the effect of a price floor
set at P=20? d. What is the effect of a price ceiling set at P=60?
e. What is the effect of a price floor set at P=60? e. Draw a
diagram showing your answers in a, b, e.

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quantity supplied, and P the price for the good. Suppose the
consumers’ income is I = 2. 6) Determine the price-elasticity of
demand if P = 2. 7) Determine the income-elasticity of demand if P
= 2. 8) Determine the price-elasticity of supply if P = 4. 9)
Determine consumers’...

Suppose there is a market at its competitive equilibrium.
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Supply p = 20 + (QS /3) The government introduces a subsidy of s
= $4 per unit of the good sold and bought.
(a) Draw the graph for the demand and supply before subsidy.
(b) What is the equilibrium price and quantity before the
subsidy and after the subsidy?
(c) Looking at the prices buyers pay and sellers receive after
the subsidy compared to...

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(1.5 Marks) 2. Suppose the government guaranteed producers a price
floor of AED 90 per bushel. Estimate the effect on the quantity
supplied and demanded. (1.5 Marks) 3. Would the price floor affect
the Market outcome? (Calculate the surplus or shortage )....

You are given the following information about the demand for and
supply of widgets in the Republic of Xénïa. Answer the questions
that follow. If you draw diagrams, use a ruler, label the diagrams
completely, show demand choke price, demand intercept, supply choke
price, supply intercept, etc. Do not use double columns or put
rectangles or squares around your answers. Use “D” for demand and
“S” for supply. Do not use Qd or Qs to label your diagrams.
Although you...

Suppose demand and supply are given by Qd = 60 – P
and Qs = P -20
What are the equilibrium quantity and price in this
market?
Determine the quantity demanded, the quantity suppled, and the
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market.
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Suppose the demand function is given by P = 100-0. 02Q , and
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Consider the following general demand and supply functions for a
given commodity.
Qd=a-bp
Qd=-c+dp
a. Find the equilibrium price and quantity [4 Marks]
b. Suppose that a fixed tax t is imposed on the product in
question, what is the new equilibrium price and quantity. [6
Marks]
d. Express the value of t in terms of a, b, c, d, and p. [3
Marks]
e. Use iii. Above to write the expression for government
revenue. [2 Marks]
f. Suppose that...

Problem II: (T1)The demand function for widgets
is given by P = 270 - 3Q and the supply is P = 20 + 2Q.
a) Find the equilibrium price and quantity of widgets.
b) Is demand elastic or inelastic at the
equilibrium point? (Calculate the elasticity of demand at the
equilibrium and classify it as elastic or inelastic.)
c.) Draw a graph showing the market equilibrium
point and highlight the consumer surplus. Clearly label your axes
and intercepts. Calculate the...

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