Suppose the market demand curve for a product is given by Qd = 500 −50P and the market supply curve is given by Qs = −50 + 25P.         a)At the market equilibrium, what is the price elasticity of demand? Hint: Find and use in place of ( and use equilibrium values of P and Q. Comment on the value of the price elasticity of demand. Suppose the price in this market is $5. What is the amount of excess demand? Suppose demand for good A is given by QDA= 500- 5PA+ 2PB+ 0.80I where PA is the price of good A,PB is the price of some other good B, and I is income. Assume that PA is currently Tk.10 PB is currently Tk.5, and I is currentlyTk.200.         a) What is the income elasticity of demand for good A at the current situation? Hint: Find ∂Q/∂I and use in place of (∆Q/∆I). Comment on the value of the income elasticity.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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  • Suppose the market demand curve for a product is given by Qd = 500 −50P and the market supply curve is given by Qs = −50 + 25P.

        a)At the market equilibrium, what is the price elasticity of demand? Hint: Find and use in place of ( and use equilibrium values of P and Q. Comment on the value of the price elasticity of demand. Suppose the price in this market is $5. What is the amount of excess demand?

  • Suppose demand for good A is given by QDA= 500- 5PA+ 2PB+ 0.80I where PA is the price of good A,PB is the price of some other good B, and I is income. Assume that PA is currently Tk.10 PB is currently Tk.5, and I is currentlyTk.200.

        a) What is the income elasticity of demand for good A at the current situation? Hint: Find ∂Q/∂I and use in place of (∆Q/∆I). Comment on the value of the income elasticity.

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