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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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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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See Also This Related BrainMass Solution

ECO212 Supply and Demand and Elasticity

1. If a 20% decrease in the price of long distance phone calls leads to a 35% increase in the quantity of calls demanded, we can conclude that the demand for phone calls is:
a. elastic.
b. inelastic.
c. unit elastic.
d. stretchy elastic.

2. Which of the following pairs are examples of substitutes?
a. Popcorn & Pepsi
b. Automobiles & Bicycles
c. Boats & Fishing Tackle
d. Wine & Cheese

3. When we say that a price in a competitive market is "too high to clear the market" we usually mean that (given upward-sloping supply curves).
a. no producer can cover the costs of production at that price
b. quantity supplied exceeds quantity demanded at that price
c. producers are leaving the industry
d. consumers are willing to buy all the units produced at that price

4. Which of the following statements is incorrect? Assume upward-sloping supply curves.
a. If the supply curve shifts left and the demand remains constant, equilibrium price will rise.
b. If the demand curve shifts left and the supply increase, equilibrium price will rise.
c. If the supply curve shifts right and the demand curve shifts left, equilibrium price will fall.
d. If the demand curve shifts right and the supply curve shifts left, price will rise.

Section Two: Short Answer (250 words or less)
1.Define "Elasticity of Demand". Give an example.

2.Define the "Law of diminishing Marginal utility". Give an example.

3.Demonstrate, using supply and demand analysis, the impact on the equilibrium price and quantity of new Hybrid automobiles when the following occurs. Using graphs as we did in the notes we worked with in Week 1, describe the change in the equilibrium price and quantity, and explain your answer. Is the equilibrium price higher, lower, or is the change indeterminate? Is the equilibrium quantity higher, lower, or is the change indeterminate?

a.Incomes increase
b.Interest rates decrease
c.The price of batteries used in the production of these vehicles decreases.
d.The price of gasoline decreases

4.Determine if the demand for the following products is price elastic or price inelastic, and explain your answer.

a.Box of cereal sold in a grocery store
b.Gasoline as a commodity
c.Gasoline sold at a local gasoline station
d.Fast food sold at a restaurant
e.Hotel rooms for people planning a vacation
f.Hotel rooms for people on business to meet an important client
g.Clothes sold in a discount retailer

5.Name three types of market systems and give an example of each.

6.Define the "Law of Demand" and the "Law of Supply". Give an example for each.

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