In Example 2.8 (page 52), we discussed the recent increase in world demand for copper, due in
Question:
a. Using the original elasticities of demand and supply (i.e., ES 1.5 and ED 0.5), calculate the effect of a 20% increase in copper demand on the price of copper.
b. Now calculate the effect of this increase in demand on the equilibrium quantity, Q*.
c. As we discussed in Example 2.8, the U.S. production of copper declined between 2000 and 2003. Calculate the effect on the equilibrium price and quantity of both a 20% increase in copper demand (as you just did in part a) and of a 20% decline in copper supply.
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Step by Step Answer:
a The original demand is Q 27 3 P and supply is Q 9 9 P as shown on page 51 The 20 increase in deman...View the full answer
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