1. Mr. Capon is a butcher who recently raised the price of steak at his market from $1:50 a pound to $2:00 a pound. Correspondingly his sales dropped from 200 pounds per day to 100 pounds per day. Is the demand for steak at Capon's market elastic or inelastic? Explain. (show all works please) Given this circumstance, advise Mr. Capon on a pricing strategy to sell more or less.
2. Using average values find the coefficient of elasticity for the following:
Explain your coefficient of elasticity.
3. The following relations describe the supply and demand for body lotions
Qd = 65,000 - 10,000 P
Qs = -35,000 + 15,000 P
Where Q is the quantity and P is the price of a body lotion, in dollars.
a. Find Qs, Qd, and shortage or surplus at prices; $6, $5, $4, $3, $2, and $1
b. What is the equilibrium price?
c. Using the law of Supply and Demand, comment on your market observation.
4. What is comparative static analysis? Given equilibrium of price and quantity, explain the impact of simultaneous shifts in demand and supply.
This solution is comprised of a detailed, step by step response which practices the concepts of supply and demand and elasticity. The full solution is presented in a Word document which is attached. An Excel file is also attached which contains the data relevant to question 3. By clicking directly onto the cells, you can see what functions were used to compute the desired values.