1.1. You are given the following demand and supply functions:P = 20 – 2Q + 0.8Z¡demandP = -1 + 0.5Q - 0.9Z2supplya. Find the reduced form equations for P and Q. Find competitive equilibrium valuesfor P and Q given Z, = 1 and Z2 = 4.b. Calculate the point elasticity of demand and supply in equilibrium.c. Again letting Zj = 1 and Z, = 4, calculate the point structural elasticities e,(QIZ)and e,(QIZ,) and the point reduced form elasticities e,(QIZ,), e,(QIZ,), e,(PIZ¡), ande,(PIZ,). [Note: €,(Q\Z;) and e,(QIZ,) are, respectively, the elasticities of demand andsupply. The s subscript indicates structural elasticity; r indicates reduced form.]d. Again letting Z, = 1 and Z, = 4, use the following two points along the demandcurve to estimate an arc elasticity for demand: Qo = 6.2, Po = 8.4, Q1 = 4.2, and P =12.4. Use the following two points to estimate an arc elasticity for supply: Qo = 9.66,Po = 0.23, Q1 = 10.66, and P, = 0.73.%3D%3D

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1.1. You are given the following demand and supply functions: P = 20 – 2Q + 0.8Z¡ demand P = -1 + 0.5Q - 0.9Z2 supply a. Find the reduced form equations for P and Q. Find competitive equilibrium values for P and Q given Z, = 1 and Z2 = 4. b. Calculate the point elasticity of demand and supply in equilibrium. c. Again letting Z, = 1 and Z2 = 4, calculate the point structural elasticities e,(QIZ,) and e,(QIZ2) and the point reduced form elasticities e,(QIZ,), e,(QIZ), e,(PIZ,), and e,(PIZ,). [Note: €,(QIZ;) and e,(QIZ,) are, respectively, the elasticities of demand and supply. The s subscript indicates structural elasticity; r indicates reduced form.] d. Again letting Z, = 1 and Z, = 4, use the following two points along the demand curve to estimate an arc elasticity for demand: Qo = 6.2, Po = 8.4, Q1 = 4.2, and P = 12.4. Use the following two points to estimate an arc elasticity for supply: Qo = 9.66, Po = 0.23, Q1 = 10.66, and P1 = 0.73. %3D %3D %3D %3D %3D

1.1. You are given the following demand and supply functions: P = 20 – 2Q + 0.8Z¡ demand P = -1 + 0.5Q - 0.9Z2 supply a. Find the reduced form equations for P and Q. Find competitive equilibrium values for P and Q given Z, = 1 and Z2 = 4. b. Calculate the point elasticity of demand and supply in equilibrium. c. Again letting Z, = 1 and Z2 = 4, calculate the point structural elasticities e,(QIZ,) and e,(QIZ2) and the point reduced form elasticities e,(QIZ,), e,(QIZ), e,(PIZ,), and e,(PIZ,). [Note: €,(QIZ;) and e,(QIZ,) are, respectively, the elasticities of demand and supply. The s subscript indicates structural elasticity; r indicates reduced form.] d. Again letting Z, = 1 and Z, = 4, use the following two points along the demand curve to estimate an arc elasticity for demand: Qo = 6.2, Po = 8.4, Q1 = 4.2, and P = 12.4. Use the following two points to estimate an arc elasticity for supply: Qo = 9.66, Po = 0.23, Q1 = 10.66, and P1 = 0.73. %3D %3D %3D %3D %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1.1. You are given the following demand and supply functions:
P = 20 – 2Q + 0.8Z¡
demand
P = -1 + 0.5Q - 0.9Z2
supply
a. Find the reduced form equations for P and Q. Find competitive equilibrium values
for P and Q given Z, = 1 and Z2 = 4.
b. Calculate the point elasticity of demand and supply in equilibrium.
c. Again letting Zj = 1 and Z, = 4, calculate the point structural elasticities e,(QIZ)
and e,(QIZ,) and the point reduced form elasticities e,(QIZ,), e,(QIZ,), e,(PIZ¡), and
e,(PIZ,). [Note: €,(Q\Z;) and e,(QIZ,) are, respectively, the elasticities of demand and
supply. The s subscript indicates structural elasticity; r indicates reduced form.]
d. Again letting Z, = 1 and Z, = 4, use the following two points along the demand
curve to estimate an arc elasticity for demand: Qo = 6.2, Po = 8.4, Q1 = 4.2, and P =
12.4. Use the following two points to estimate an arc elasticity for supply: Qo = 9.66,
Po = 0.23, Q1 = 10.66, and P, = 0.73.
%3D
%3D

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