Question

. If the equation for a demand curve is P=45-3Q. What is the elasticity in moving from a quantity of 5 to a quantity of 6?

4. The equation for a demand curve is P=4/Q. What is the elasticity of demand as price falls from 5 to 4?

5. The equation for a supply curve is 2P=Q. What is the elasticity of supply as price rises from 3 to 4?

6. CenturyLink Field has 80,000 seats. What is the shape of the supply curve for tickets to football games at this stadium?  

7. Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury item like a watch?  

Answer 1

3. P = 45 - 3Q so when Q = 5 the P = 45-3(5) = 30

When Q = 6 then P = 45 - 3(6) = 27.

Elasticity = %∆ quantity / %∆ price.

%∆ price = 30-27/30 × 100 = 3/30×100 = 10%

%∆ quantity = 5-6/5×100 = -(1)/5 × 100 = 20%

So elasticity = 20 / 10 = 2 so Ed = 2.

4. P = 4/Q so when P = 5 then Q = 4/5 = 0.80.

When P = 4 then Q = 4/4 = 1.

%∆ quantity = 0.80-1 / 0.80 × 100 =

-(0.20)/0.80× 100 = 25%

%∆ price = 5-4/4 × 100 = 1/4 × 100 = 20%

Elasticity = 25/20 = 1.25 so Ed = 1.25.

5. 2P = Q when P = 3 then Q = 2(3) = 6

When P = 4 the Q = 2(4) = 8

%∆ qunatity = 6-8/6 × 100 = 33.3%

%∆ price = 3-4/3× 100 = -(1)/3 × 100 = 33.3%

Elasticity = 33.3/33.3 = 1 so Ed = 1.