Question #270560

Suppose market demand is given Qd=a-bp as and market supply is given as, Qs=c+dp and then find the following

o  Equilibrium price

o  Equilibrium quantity

o  Price elasticity of demand at equilibrium

o  Price elasticity of supply at equilibrium 


1
Expert's answer
2021-11-24T12:38:31-0500

Price elasticity of supply at equilibrium


priceelasticityofdemand=percentagechangeinquantitysuppliedpercentagechangeinpriceprice elasticity of demand=\frac{percentage change in quantity supplied}{percentagechange in price}


PERCENTAGE CHANGE IN QUANTINTY SUPPLIED =ΔQQ\frac {\Delta Q}{Q}

PERCENTAGE CHANGE IN PRICE=ΔPP\frac {\Delta P}{P}

change in quantity SUPPLIED ΔQ=Q1Q\Delta Q =Q{1}- Q

change in priceΔQ=P1P\Delta Q =P{1}- P


PRICE ELASTICITY =ΔQQ×PΔP\frac{\Delta Q}{ Q} \times \frac{P}{\Delta P}


PRICE ELASTICITY =ΔQΔP×PQ\frac{\Delta Q}{\Delta P } \times \frac{P}{Q} 

but from the supply equation ΔQΔP\frac{\Delta Q}{\Delta P } is the gradient of the equation


therefore from Qs=(c+dp)Q{s}=(c+ dp) 

dd is the gradient of the equation



the price elasticity of supply will be


Pe=d×PqP{e}=d \times \frac{P}{q}

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