Question: Let D(p) = 1 p and S(p) = p where p is the market price be the market demand function and market supply function respectively.

Let D(p) = 1 p and S(p) = p where p is the market price be the market demand function and market supply function respectively.

(a) Find the equilibrium price p * and equilibrium quantity Q * of the market.

(b) At the equilibrium price p * , is the price elasticity of demand larger, smaller or equal in magnitude to the price elasticity of supply ?

[Note: The price elasticity of supply is defined as = () . ()]

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