1. Suppose the demand for towels and supply of towels are given by the QD = 100-4P QS = P a. Find the equilibrium price and quantity using demand and supply functions above. b. Plot demand and supply curve on the same graph and point out the equilibrium quantity and price. You should draw each graph precisely with intercepts and slopes. c. Solve for the price elasticities of demand and supply at the equilibrium point. Which is more elastic: demand or supply? Simply explain why.
1. Suppose the demand for towels and supply of towels are given by the QD = 100-4P QS = P a. Find the equilibrium price and quantity using demand and supply functions above. b. Plot demand and supply curve on the same graph and point out the equilibrium quantity and price. You should draw each graph precisely with intercepts and slopes. c. Solve for the price elasticities of demand and supply at the equilibrium point. Which is more elastic: demand or supply? Simply explain why.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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![1. Suppose the demand for towels and supply of towels are given by the below:
QD = 100 - 4P
QS = P
a. Find the equilibrium price and quantity using demand and supply functions above.
b. Plot demand and supply curve on the same graph and point out the equilibrium
quantity and price. You should draw each graph precisely with intercepts and slopes.
c. Solve for the price elasticities of demand and supply at the equilibrium point. Which
is more elastic: demand or supply? Simply explain why.
d. Suppose there was a demand shock so that at each price 20 more towels are demanded
since consumers want more. Plot the new demand curve on the graph that you derive
in part (a). Find the new equilibrium price and quantity.
(Hint: You may derive a new demand function by adding a constant to find a new
equilibrium price and quantity.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbe157a84-8ac6-419a-bfda-98f3e9e167bf%2Fa8d7a7a7-47f6-4363-b73d-bdfc5dfdc571%2F88v9sqr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. Suppose the demand for towels and supply of towels are given by the below:
QD = 100 - 4P
QS = P
a. Find the equilibrium price and quantity using demand and supply functions above.
b. Plot demand and supply curve on the same graph and point out the equilibrium
quantity and price. You should draw each graph precisely with intercepts and slopes.
c. Solve for the price elasticities of demand and supply at the equilibrium point. Which
is more elastic: demand or supply? Simply explain why.
d. Suppose there was a demand shock so that at each price 20 more towels are demanded
since consumers want more. Plot the new demand curve on the graph that you derive
in part (a). Find the new equilibrium price and quantity.
(Hint: You may derive a new demand function by adding a constant to find a new
equilibrium price and quantity.)
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