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Demand and Supply curve: Equilibrium price, price elasticity

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1. Suppose the market demand curve for a Product is given by Q = 250 - 5P and the market supply curve is given by Q = -50 + 25P.
1. What are the equilibrium price and quantity in this market?
2. At the market equilibrium, what is the price elasticity of demand?
3. Suppose the price in this market is $8. What is the amount of excess demand?

2. Suppose the market demand curve for a product is given by Q = 500 - 156P + 20I and the market supply curve is given by Q = -25 + 10P - 10K. Assume initially that I= 10 and K = 5.
1. What are the equilibrium price and quantity in this market?
2. What are the endogenous and exogenous variables in the equilibrium model?
3. Suppose K suddenly increases to 20. How will this affect the market equilibrium calculated in part 1?

3. Suppose demand for good A is given by Q = 500 - 10Pa + 2Pb + 0.70I where Pa is the price of Good A, Pb is the price of some other good B, and I is income. Assume that Pa is currently $10, Pb is currently $5, and I is currently $100.
1. What is the elasticity of demand for good A with respect to the price of good A at the current situation.
2. What is the cross price elasticity of the demand for good A with repect to the price of good B at the current situation?
3. What is the income elasticity of demand for good A at the current situation.

4. Suppose the market demand curve for a product is given by Q = 500 - 5P and the market supply curve is given by Q = 20P
1. What are the equilibrium price and quantity in this market?
2. Now suppose that the new demand curve for the same product is given by Q = 1000 - 5P and the market supply curve remains unchanged. What are the new equilibrium price and quantity in this market.

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Solution Summary

A tutorial that provides clear and concise answers to Economics questions on Equilibrium price, price elasticity of demand, exogenous variables, endogenous variables.

The tutorial provides worked answers to the questions posted above.

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  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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