Purchase Solution

Demand and Supply in Competitive Markets

Not what you're looking for?

Ask Custom Question

The market for hog hats is competitive and demand is given by P=75-Q while supply is given by P=15+2Q. What are the equilibrium price and quantity in this market?

Calculate the elasticity of demand at a price of 50. Give an economic interpretation to your answer. Is demand elastic, unit elastic or inelastic at this price?

To enable more students to wear hog hats to games, the UA decides to give hog hat producers a subsidy of $9 per unit. What price will consumer's pay and how many hog hats will they buy? How much will the UA spend on the subsidy? What will be the change in producer surplus?

Purchase this Solution
Solution Summary

The demand and supply for competitive markets are examined.

Solution Preview

Demand curve is given by P = 75 - Q
Supply curve is given by P = 15 + 2Q

At the equilibrium the two curves intersect. We can find this by solving

75 - Q = 15 + 2Q
or, 75 - Q + Q = 15 + 2Q + Q
or, 75 = 15 + 3Q
or, 75 - 15 = 15 + 3Q - 15
or, 60 = 3Q
or, 20 = Q.

Thus equilibrium quantity is 20. Equilibrium price can be obtained by plugging this quantity into either the demand or the supply curve. Plug Q = 20 in the demand curve, and we get P = 75 - 20 = 55. You can verify this is the right price by plugging Q = 20 in the supply curve to get P = 15 + 2Q = 15 + (2*20) = 55.

Price elasticity of demand is calculated using the formula

PED = (1/Slope of Demand Curve)*(P/Q).

The slope of the demand curve is -1. At P = ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Economics Definitions

    Prices and markets are related concepts- typically, we think of prices being set in competitive markets. By bringing buyers and sellers of goods together, price is determined in a competitive market.

  • Competitive Markets

    68282 Competitive Markets 1. What is a competitive market? Briefly describe the types of markets other than perfectly competitive markets. 5. Popeye's income declines and as a result he buys more spinach. Is spinach an inferior or a normal good?

  • Tax Incidence, Competitive Markets, and Luxury Taxes

    Explain how the elasticities of supply and demand in competitive markets can have direct implications for the ability of buyers and sellers to shift the burden of taxes imposed upon them.

  • supply and demand in a market in equilibrium

    The markets for the professional sports players, farmers, factory workers, engineers and teachers are generally competitive markets.

  • Labor Unions and Labor markets




    Employer power
    Labor unions represent market power on supply side. However, labor markets with significant
    power on both sides, demand and supply, are common.
    Monopsony: a market in which there is only one buyer.

  • Professional Sport Players - Supply, Demand & Equilibrium

    The markets for the professional sports players, farmers, factory workers, engineers and teachers are generally competitive markets.

  • impact of the minimum wage on unemployment using demand, supply and competitive equilibrium analysis

    18920 Apply demand, supply and competitive equilibrium analysis 1. "If price rises then demand decreases. But if demand decreases, then equilibrium price will fall.

  • Why can't competitive firms affect price?

    See the attached file for a graph of the market supply and demand and the supply and demand curve for a typical firm in the market. The following discusses the characteristics faced by the competitive firm.

  • demand for typing by students at a local college

    Give the market supply for pages per semester at each price. b. What is the equilibrium price and quantity, using the demand curve in question #1? c. What happens to the supply curve and price and output if Ann dropped out of the market? 3.

View More Related Solutions