Q.3. (a) Compare price elasticity of supply at thepoint of intersection, c, for two linear supplycurves, S1 and S2, where S1 is steeper than S2Answer using a diagram(b) Suppose we have market demand and supplyfunctions:Qd = 1000 - 2P Qs = -100 + 0.5P(where Qd = Quantity demanded, Qs = Quantitysupplied, P = Price)(i) Solve for equilibrium P and Q. Calculateconsumer surplus and producer surplus atequilibrium. Draw graphs to illustrate.(ii) Suppose a tax of $50 per unit is imposed bythe government on the buyers. Solve for the newequilibrium P and Q.(iii) Explain the effect of tax in such a situationusing a diagram.

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Q.3. (a) Compare price elasticity of supply at the point of intersection, c, for two linear supply curves, S1 and S2, where S1 is steeper than S2 Answer using a diagram

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

Q.3. (a) Compare price elasticity of supply at the
point of intersection, c, for two linear supply
curves, S1 and S2, where S1 is steeper than S2
Answer using a diagram
(b) Suppose we have market demand and supply
functions:
Qd = 1000 - 2P Qs = -100 + 0.5P
(where Qd = Quantity demanded, Qs = Quantity
supplied, P = Price)
(i) Solve for equilibrium P and Q. Calculate
consumer surplus and producer surplus at
equilibrium. Draw graphs to illustrate.
(ii) Suppose a tax of $50 per unit is imposed by
the government on the buyers. Solve for the new
equilibrium P and Q.
(iii) Explain the effect of tax in such a situation
using a diagram.

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None
1. Answer both parts of this question. (a) Define the price elasticity of demand and briefly discuss its economic meaning. (b) For demand function x = Ap, show that price elasticity is equal to -7.
4) Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.
2. [Own Price Elasticity of Demand] Given a demand function Q=f(P), the own price elasticity of demand is defined as P - (de). (2). ε = What is the own price elasticity of demand e (a) for the linear demand function Q = 200-3.5P when P = 10. (b) for the linear inverse demand function P= 100-3.5Q when Q = 10. (c) for the inverse demand function P=Q-35, when (i) Q = 5; (ii) Q = 10.