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    Price Elasticity

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    1. A market consists of two individuals. Their demand equations are Q1 = 16-4P and Q2 = 20-2P respectively.
    a. What is the market demand equation?
    b. At a price of $2, what is the point price elasticity for each person and for the market?

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    Solution Preview

    Answer (a):

    The market demand is the sum of two individual demand functions:
    Q = 36 - 6P.

    Answer (b):
    At price $2
    Q1 = 16 - 4x2 = 8
    Q2 = 20 - ...

    Solution Summary

    The solution calculates the elasticity of demand for the scenario given.