Additional Practice Problems
Practice Problem #1
• The demand for apartments is P=1200-Q while
the supply is P=Q units.
1. Suppose the government imposes rent
control at P=$300. Calculate the excess
demand.
2. Suppose demand in the marker grows to
P=1400-Q. How is excess demand affected
by the growth in demand?
Practice Problem #2
• Suppose demand is P=600-Q and supply is P=Q in the
soybean market, where Q is tons of soybeans per
year. The government sets a price support at
P=$500/ton and purchases any excess supply at this
price.
1. How much is the government spending on buying
the excess supply?
2. Suppose that in response, farmers are switching
from producing corn to soybeans, expanding supply
to P=(1/2)Q. Now how much is the government
spending?
Practice Problem #3
• The monthly demand for calculators among
engineering students is P=100-Q, where P is the
price per calculator and Q is the number of
calculators purchased per month.
1. If the price is $30, how much revenue will the
calculators makers get each month?
2. Find the price elasiticity of demand.
3. What should the producers do to increase revenue?
Practice Problem #4
• A hot dog vendor faces a daily demand curve of Q=1800-15P,
where P is the price of a hot dog in cents and Q is the number
of hot dogs purchased each day.
1. If the vendor has been selling 300 hot dogs per day, how
much revenue has he been collecting?
2. What is the price elasticity of demand?
3. The vendor decides that he wants to generate more
revenue. Should he increase or lower prices?
4. At what price would the hot dog vendor achieve maximum
revenue?