Question

suppose the markets for grass seed can be follow as demand 100-2p ,supply =3p at the equilibrium ,calculate the price elasticities of demand and supply?what would happen with quantitiy demand if the price reach 30 ?price reach 50

Answer 1

Since the market is in equilibrium

$100-2P=3P$

$P=20; S1=D1=60$

Suppose P=30 (+50%), then S2=90 (+50%) and D2=40 (-33.3%)

$Price Elasticity Of Demand =\Delta Q/\Delta P$ =-33%/50%=-0.66

$Price Elasticity of Supply = \Delta Qs/\Delta P$ = 50%/50%=1

if P=30, D=40; if P=50, D=0