# Supply and demand graph; elasticity of demand

Price of Steaks Supply of Steaks Demand for Steak (Shortages) or Surplus

25 30 10

20 20 12

15 15 15

10 10 20

5 5 30

a. Using the above date please create a supply and demand graph

b. Indicate on the graph the point of market equilibrium

c. Complete the last column indicating at each price level whether the market has a surplus or a (shortage) and by what amount

2.. A restaurant that goes by the name Road Kill Cafe is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops marketing the "Eat More Squirrel" design indicate that the demand curve for the T-shirts can be described as:

Q = 300 - 5P

Where Q is T-shirt sales and P is price.

a. How many T-shirts could the cafe sell at $5 each?

b. What price would they have to charge to sell 200 T-shirts?

c. Calculate the own price elasticity of demand for T-shirts at a price of

$20.

3.

a. Price change of shoes = 10%

Qty. Change of shoes purchased = 8%

What is the Elasticity of Demand? Is it elastic or inelastic?

b. Price Change of Auto's = 15%

Qty. Change of Auto's purchased = 20%

What is the Elasticity of Demand? Is it elastic or inelastic?

c. Your income increases by 12%

Your Purchases increase 6%

What is the Income Elasticity? Is it elastic or inelastic?

4. The demand for new recreational vehicles (motor homes) in the United States is highly cyclical and sensitive to diesel fuel prices and interest rates. Given these characteristics, describe the effect of each of the following on the quantity demanded or the demand for new motor homes. Indicate whether the effect of each of the following is an upward or downward movement along a given demand curve or instead involves an outward or inward shift in the relevant demand curve for new motor homes. Explain your answers.

a. A decrease in the average price of new motor homes.

b. An increased fear of traveling by air because of terrorist threats.

c. A fall in the price of diesel fuel (used in many motor homes) because of a peaceful resolution of the war in Iraq.

d. A significant rise in advertising by cruise ship operators.

5. In the aftermath of the September 11 terrorist attacks, the quantity sold of airline tickets in 2002 fell by a large percentage when compared to 2001. During the same time period the average price for airline tickets also fell. The law of demand states that â??the quantity demanded of a good varies inversely with its price.â? Does the observed change in the purchase and price of airline tickets violate the law of demand? Why or why not?

5. Calculate the 4 firm Oligopoly concentration ratio using the following numbers:

a. Total Industry Sales = $1,000,000

b. Sales of the Top 4 firms are:

$175,000

$150,000

$125,000

$100,000

https://brainmass.com/business/accounting/supply-and-demand-graph-elasticity-of-demand-357553

#### Solution Preview

See the attached file.

Q1

Price of Steaks Supply of Steaks Demand for Steak (Shortages) or Surplus

25 30 10 20 Surplus

20 20 12 8 Surplus

15 15 15 0

10 10 20 -10 Shortage

5 5 30 -25 Shortage

a. Using the above date please create a supply and demand graph

b. Indicate on the graph the point of market equilibrium

See the green trainagle on the graph. The datapoint is shown in yellow color in the table above

c. Complete the last column indicating at each price level whether the market has a surplus or a (shortage) and by what amount

See the table above

Q2

"A restaurant that goes by the name Road Kill Cafe is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops marketing the ""Eat More Squirrel"" design indicate that the demand curve for the T-shirts can be described as:

"

"Q = 300 - 5P

Where Q is T-shirt sales and P is price."

"Where Q is T-shirt sales and P is price.

"

a. How many T-shirts could the cafe sell at $5 each?

P $5.00

Q 275

"b. What price would they have to charge to sell 200 T-shirts?

"

Write the demand equation in reverse order, we get

P=(300-Q)/5

Q 200

P $20.00

c. Calculate the own price elasticity of demand for T-shirts at a price of $20.

Q=300-5P

dQ/dP= -5

at P= $20.00

Q= 200

Own price elasticity of demand = dP/DQ*P/Q -0.50

Q3

a. Price change of shoes = 10%

Qty. Change of shoes purchased = ...

#### Solution Summary

This post shows how to create supply and demand graph. It addresses multiple questions of pricing, quantitative sold, elasticity of demand, income elasticity and oligopoly

A tutorial that explains how to calculate the Equilibrium price of a product, cross price elasticity of demand, Income elasticity of Demand and Elasticity of Demand.

The tutorial also explains how to determine the exogenous and endogenous variables in a function.

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.