a. The market equilibrium level of price and quantity are:
Qd = Qs,
5000 - 6P = 1500 + P,
7P = 3500,
P = 500,
Q = 1500 + 500 = 2000 units.
b. Price elasticity of demand using point elasticity method is:
Ed = -6×500/2000 = -1.5, so the demand is elastic.
c. If government gives subsidy to cement manufacturers, then supply of cement will increase, equilibrium price will decrease, and equilibrium
quantity of cement will increase.