Question: 2. Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are given as follows: a. Calculate the price

2. Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are given as follows:

Price (Dollars) Demand (Millions) Supply (Millions) 60 22 14 80 20 16

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?

Price (Dollars) Demand (Millions) Supply (Millions) 60 22 14 80 20 16 100 18 18 120 16 20

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