Question #103018

given market demand Qd= 50 - P and market supply P= Qs + 5

A. find the market equilibrium price and quantity?

B. what would be the state of the market if market price was fixed at $ 25 per unit?

C. calculate and interpret price elasticity of demand at the equilibrium point

A. find the market equilibrium price and quantity?

B. what would be the state of the market if market price was fixed at $ 25 per unit?

C. calculate and interpret price elasticity of demand at the equilibrium point

Expert's answer

A. Qd= 50 - P, P = Qs + 5 -> Qs = P - 5.Â

The market equilibrium price and quantity are:

Qd = Qs,

50 - P = P - 5,

2P = 55,

P = $27.5.

Q = 27.5 - 5 = 22.5 units.

B. If market price was fixed at $25 per unit, then there will be a shortage (Qd > Qs).

C. Price elasticity of demand at the equilibrium point is:

"Ed = -1\u00d7\\frac{27.5}{22.5} = -1.22,"

so the demand is elastic.

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## Comments

Gemechu Tekea21.08.21, 14:56Excellent

Faisa Shiferaw02.02.21, 11:20Very good explanations and work out

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