1. Explain the rationing functioning function of price in correcting market disequilibria

[5 marks]

1. If the demand curve of a firm is and the supply curve is , compute the equilibrium price and quantity.

[5 marks]

1. Compute and interpret the price elasticity of demand and the price elasticity of supply.

[6 marks]

1. If the equilibrium price increases by 5% and equilibrium quantity increases by 15%, find and interpret the new price elasticities of supply and demand.

[6 marks]

1. Graphically illustrate the effect that an increase in demand for this firm's product would have on the short run equilibrium price and quantity.

[3 marks]

Document1 - Microsoft Word X Home Insert Page Layout References Mailings Review View Ruler Document Map 8 One Page View Side by Side Gridlines Thumbnails 3 Two Pages IF Synchronous Scrolling Print Full Screen Web Outline Draft Zoom 100% New Arrange Split Switch Macros Layout Reading Layout Message Bar Page Width Window All e Reset Window Position | Windows Document Views Show/Hide Zoom Window Macros 1 . . . I . . . . . Y IA . . 1 . . . I . . . 2 . . . 1 . . . 3 . . . 1 . . . 4 . . . 1 . . . 5 . . . 1 . . . 6 . 6 . . .7 . . QUESTION 2 a) Explain the rationing functioning function of price in correcting market disequilibria [5 marks] b) If the demand curve of a firm is Qa = 3600 - 550P and the supply curve is. Qs = 7100 -532P, compute the equilibrium price and quantity. [5 marks] c) Compute and interpret the price elasticity of demand and the price elasticity of supply. [6 marks] d) If the equilibrium price increases by 5% and equilibrium quantity increases by 15%, find and interpret the new price elasticities of supply and demand.| [6 marks] e) Graphically illustrate the effect that an increase in demand for this firm's product would have on the short run equilibrium price and quantity. [3 marks] Page: 1 of 1 Words: 110 BY = 100% +