Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are
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a. Calculate the price elasticity of demand when the price is $80 and when the price is $100.
b. Calculate the price elasticity of supply when the price is $80 and when the price is $100.
c. What are the equilibrium price and quantity?
d. Suppose the government sets a price ceiling of $80. Will there be a shortage, and if so, how large will it be?
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a With each price increase of 20 the quantity demanded decreases by 2 million Theref...View the full answer
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