1.The demand and supply functions are as follows:
Qd = 14-4P
Qs = -4+2P
Where P stands for price, Qd and Qs represents quantity demanded and supplied,
respectively.
a. Find equilibrium quantity (Q) and price (P) in this market.
P=3
Q=2
b. Graphically show consumer surplus and produce surplus.
Answer:
c. Calculate consumer surplus and produce surplus.
CS = 0.5
PS = 1
2. Using the following demand and supply functions,
Qd = 100 – 2P
Qs = 20 + 3P
a. graphically show consumer surplus and produce surplus.
b. calculate consumer surplus and produce surplus.
Answer:
3. Using the following table, calculate the price elasticity of demand and price elasticity
of supply when price move from 40 to 60. Interpret your results.
Price Demand
80
0.00
70
12.50
60
25.00
50
37.50
40
50.00
30
62.50
20
75.00
Answer
Supply
150.00
125.00
100.00
75.00
50.00
25.00
0.00
4. Using the following demand function, determine the price elasticity of demand.
QD= 4Pn, n<0
Answer
n<0
5. If TC = 10 + 0.5Q2 and TR = 50 + 110Q – 5Q2, find profit maximizing output level.
Answer