Answer to Question #250028 in Sociology for Muskan

Question

a. Initially, the demand and supply for beans are where p ï € ½ price in cents per pound and Q ï € ½ pounds per day. The government has a stockpile of beans (which is not included in the initial supply equation). It wants to cut the price of beans to 8 cents per pound. How much should it sell from its stockpile?b. Explain each of the following case.If the elasticity is greater than 1, is demand elastic or inelastic? If the elasticity equals 0, is demand perfectly elastic or perfectly inelastic?If demand is elastic, how will an increase in price change total revenue?

Answer 1

The demand is elastic if the formula produces an absolute value more significant than one. To put it another way, quantity moves quicker than price.

Because price changes do not affect demand, a product with an elasticity of 0 is termed perfectly inelastic.

If demand is elastic at a particular price level, lowering the price by a certain percentage will result in an even more significant percentage rise in the quantity sold, increasing overall income.