Answered: The market for Blu-ray movies is…

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

The market for Blu-ray movies is perfectly competitive, with the market supply curve given by

O = 15P and the market demand curve given by Q = 400 - 10P. The resulting market equilibrium is

P* = 16, Q*=240.

(a) Calculate the price elasticity of demand at the market equilibrium. Is demand elastic or inelastic at

this point, and what does this mean?

(b) Suppose that supply increases so that producers are willing to sell 10 more Blu-rays at any price,

and at the same time demand decreases so that consumers are willing to purchase 40 fewer Blu-rays

at any price. Find the new equilibrium price and quantity.

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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