2. In economics, the supply of a product is the quantity of that product suppliers are willing to provide at a given price. In theory, the quantity supplied of a product increases if the price of that product increases. Suppose that there is a linear relationship between the quantity supplied, S, of the product described in Problem 1 and its price, p. The quantity supplied weekly is 100 when the price is $2 and the quantity supplied rises by 50 units when the price rises by $0.50. a. Find a formula for S in terms of p. b. Interpret the slope of your formula in economic terms. c. Is there a price below which suppliers will not provide this product? d. The market clearing price is the price at which supply equals demand. According to theory, the free-market price of a product is its market clearing price. Using the demand function

2. In economics, the supply of a product is the quantity of that product suppliers are willing to provide at a given price. In theory, the quantity supplied of a product increases if the price of that product increases. Suppose that there is a linear relationship between the quantity supplied, S, of the product described in Problem 1 and its price, p. The quantity supplied weekly is 100 when the price is $2 and the quantity supplied rises by 50 units when the price rises by $0.50. a. Find a formula for S in terms of p. b. Interpret the slope of your formula in economic terms. c. Is there a price below which suppliers will not provide this product? d. The market clearing price is the price at which supply equals demand. According to theory, the free-market price of a product is its market clearing price. Using the demand function

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 10PA

See similar textbooks

Similar questions

What does a downward-sloping demand curve mean about how buyers in a market will react to a higher price?
Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
Explain all the reasons why a decrease in a products price would lead to an increase in purchases.
What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens lo the measured elasticity? How would you explain that?
Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain. Hint: Think about how the price elasticity of demand will differ between necessities and luxuries.
Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3. What will happen to the demand for apples?
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
What is the rule relating the ratio of marginal utility to prices of two goods at the optimal choice? Explain why, if this rule does not hold, the choice cannot be utility-maximizing
What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.
Review Figure 3.4 again. Suppose the price of gasoline is 1.00. Will the quantity demanded he lower or higher than at the equilibrium price of 1.40 per gallon? Will the quantity supplied be lower or higher? Is them a shortage or a surplus in the market? If so, of how much? Figure 3.4 Demand and Supply of Gasoline
The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year by the avenge person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
What is the price elasticity of demand? Can you explain it in your own words?