1. Supply and Demand, Elasticity Consider the market for butter. The demand curve is given by Q° = a+ b x P + c x 1, where I is the average income and Pis the price of butter. The supply curve is Q° = d xP+ e x Pm + f. where Pm is the price of milk. At above: a=250, b=-2, c=4, d=6, e= -20, and f= -20. 1. If I= 20 and Pm=2. What is the equilibrium quantity (no need of price)? It is 2. Suppose, currently, P=120,1 = 20, and Pm=10. What is the income elasticity of demand at the current income level of 1? It is 3. Suppose, currentiy. P=120, 1 = 20, and Pm=10. What is the cross-price elasticity of suppy at the current income price of Pm? It is 4. Suppose, currently, P-120, 1 = 20, and Pm=10. What is the price elasticity of supply at the current income level of P? It is
1. Supply and Demand, Elasticity Consider the market for butter. The demand curve is given by Q° = a+ b x P + c x 1, where I is the average income and Pis the price of butter. The supply curve is Q° = d xP+ e x Pm + f. where Pm is the price of milk. At above: a=250, b=-2, c=4, d=6, e= -20, and f= -20. 1. If I= 20 and Pm=2. What is the equilibrium quantity (no need of price)? It is 2. Suppose, currently, P=120,1 = 20, and Pm=10. What is the income elasticity of demand at the current income level of 1? It is 3. Suppose, currentiy. P=120, 1 = 20, and Pm=10. What is the cross-price elasticity of suppy at the current income price of Pm? It is 4. Suppose, currently, P-120, 1 = 20, and Pm=10. What is the price elasticity of supply at the current income level of P? It is
Chapter6: Elasticity
Section: Chapter Questions
Problem 11QP: Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price...
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Transcribed Image Text:QUESTION 1
1. Supply and Demand, Elasticity
Consider the market for butter. The demand curve is given by
QD = a+ b x P + cx I,
where I is the average income and Pis the price of butter. The supply curve is
Q° = d x P + e x Pm + f.
where Pm is the price of milk.
At above: a=250, b=-2, c=4, d=6, e= -20, and f= -20.
1. If I = 20 and Pm=2. What is the equilibrium quantity (no need of price)?
It is
2. Suppose, currently, P=120, 1 = 20, and Pm=10. What is the income elasticity of demand at the current income level of I?
It is
3. Suppose, currently, P=120, 1 = 20, and Pm=10. What is the cross-price elasticity of suppy at the current income price of Pm?
It is
4. Suppose, currently, P=120, I = 20, and Pm=10. What is the price elasticity of supply at the current income level of P?
It is
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