Answer to Question #109139 in Microeconomics for M.SAAD FAROOQ KHAN

Question

suppose the market for grass seed can be expressed as follows demand =100-2p and supply =3p at the equilibrium ,calculate the price elasticity of demand and supply

Answer 1

With given supply and demand curve the equilibrium price and quantity are P=20. Q=60.

Point elasticity formula: 

$E=\frac{dQ}{dP}\times\frac{P}{Q}.$

So, $Ed=(-2)\times\frac{20}{60}=-\frac{2}{3}$ .

$Es = 3\times\frac{20}{60}=1.$

The price elasticity of demand is -2/3, the price elasticity of supply is 1.