Answer to Question #109994 in Microeconomics for Saadfarooq

Question

Supose the.market for grass seed can be expressed as,follow as demand 100-2p,supply 3p at the equilibriium ,calculate the price elasticities of supply and demand ?what would happen with quantity demand if the price reach 30 and price reach to 50?

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, $Ed = -2\times\frac{20}{60}.$

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

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

Demand curve $Q=100-2P$ , so if the price is P=20, than the demand is $Q(30) = 100-2\times30=40.$

If the price is 50, that the demand is $Q(50) = 100-2\times50=0.$