Answered: Equilibrium is 140, 1500 The longer…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Dr/Sr means Short run of Supply and Demand,

DL/Sl means Long run of Supply and Demand.

Equilibrium is 140, 1500
The longer curly bracket is long run, the shorter one is short run.
In the short run, the price elasticity of demand is equal to what via midpoint method? (-.63,.38, or -.33)

In the long run, the price elasticity of demand is equal to what via midpoint method? (.83,-.33, or -.63)

Rent
(per month)
Market rent = $1,500
Rent control = $1,000-
-
E
100 120 140 160 180
s.sr
525L
PLOK
Sopr
Quantity
(one-bedroom
apartments)

Expert Solution

Step 1

The elasticity of demand measures the changes in quantity demanded with respect to the changes in the price of the product. The formula is given by:

$e_{d} = \frac{(Q_{2} - Q_{1}) / M i d p o i n t Q}{(P_{2} - P_{1}) / M i d p o i n t P} r e p l a c i n g t h e f o r m u l a s f o r m i d p o i n t w e g e t t h e s i m p l i e d f o r m u l a a s e_{d} = \frac{(Q_{2} - Q_{1}) / (Q_{2} + Q_{1})}{(P_{2} - P_{1}) / (P_{2} + P_{1})}$

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