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Demand and Supply in Competitive Markets

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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?

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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 = ...

Solution Summary

The demand and supply for competitive markets are examined.

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See Also This Related BrainMass Solution

Create a table differentiating Between Market Structures. Discuss labor markets in general and for a specific industry.

SEE ATTACHED. It is easier to read than below.

Part I: Differentiating Between Market Structures Table

Prepare a table that describes the characteristics of competitive markets, monopolies, and oligopolies. Format the table as follows:
a. Column headings should be the four market structures:
b. Row headings should help explain the basis for your market characterization:
Perfect competition Monopoly Monopolistic Competition Oligopoly
An example of an organization
Goods or services produced by the organization
Barriers to entry
Numbers of organizations
Price elasticity of demand
Economic profits (Is there a presence of economic profits? (Yes or no.)

Part II: Differentiating Between Market Structures Paper

Prepare a 1,050-1,400-word paper summarizing the content of the table. Address the following questions:
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a. Compare and contrast public goods, private goods, common resources, and natural monopolies.
b. Explain how labor market equilibrium is affected by the supply and demand of labor.
c. Select an organization with which you are familiar and identify the market structure of that organization. Evaluate the effectiveness of this structure for the organization.
d. For your selected organization, summarize the factors that affect labor supply and demand.

Be sure to properly cite your references. If you used an electronic source, include the URL. If you used a printed source please attach a copy of the data to your paper.

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