Question

In: Economics

A good’s demand is given by: P = 795 – 2Q. At P = 138, the...

A good’s demand is given by: P = 795 – 2Q. At P = 138, the point price elasticity is: Enter as a value (round to two decimal places if necessary).

Solutions

Expert Solution

Point price elasticity = (P/Q) x (∆Q/∆P)

Demand function =

P = 795 - 2Q

Q = 397.5 - 0.5P

Let price changes by $ 1

Q will change by -0.5 units

Therefore, ∆Q/∆P = -0.5/1

= - 0.5

At P = 138

138 = 795 - 2Q

Q = 328.5

Point Price elasticity at ( 138 , 328.5 ) is

(138/ 328.5) x ( -0.5)

= - 0.021

Therefore, demand is relatively inelastic.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

The market demand is given by P = 130 – 2Q, where P ($/unit) is the...
The market demand is given by P = 130 – 2Q, where P ($/unit) is the price and Q is the market quantity demanded (units). The marginal cost of producing the good is flat MC = $10 per unit. Use these for all the questions below. 1. In a perfectly competitive market equilibrium, a. what is the price ($/unit)? b. what is the market quantity (units)? c. what is the Herfindahl-Hirschman Index HHI? d. what is the Lerner Index LI?...
The market demand is given by P = 130 – 2Q, where P ($/unit) is the...
The market demand is given by P = 130 – 2Q, where P ($/unit) is the price and Q is the market quantity demanded (units). The marginal cost of producing the good is flat MC = $10 per unit. Use these for all the questions below. In a Cournot duopoly market equilibrium, what is the price ($/unit)? what is the market quantity (units)? what is the Herfindahl-Hirschman Index HHI? what is the Lerner Index LI? what is the (social) surplus...
1. In the market for pencils, demand is given by P = 16 – 2Q, and...
1. In the market for pencils, demand is given by P = 16 – 2Q, and quantity supplied is given by P = 4 + Q. If the government provides a $3-per-unit subsidy to pencil producers, the cost of the subsidy to the government will be a. 12 b. 15 c. 6 d.3 e. None of these 2. In the market for pencils, demand is given by P = 16 – 2Q, and quantity supplied is given by P =...
In a hypothetical market, The demand equation is given as: P = 62 - 2Q The...
In a hypothetical market, The demand equation is given as: P = 62 - 2Q The supply equation is given as: P = 13 + 3Q. Assuming a monopoly market with Q = 7: 1) What is the monopoly market price? 2) What is the consumer surplus? 3) What is producer surplus? 4) What is the total wealth?
1. In the Australian market for tea, demand is given by P = 10 - 2Q...
1. In the Australian market for tea, demand is given by P = 10 - 2Q and supply is P = 2Q. Q represents tonnes of tea per year. Suppose that the government provides a subsidy of $2 per ton of tea. The introduction of the subsidy will _______ consumer surplus by ________. 2. In the Australian market for coffee, demand is given by P = 10 - Q and supply is P = Q. Q represents tonnes of coffee...
Suppose the demand curve in a city is given by P = 100 - 2Q, where...
Suppose the demand curve in a city is given by P = 100 - 2Q, where P denotes price and Q the local GDP. The supply curve is given by P = 10 + Q. Now Suppose that due to an initial impulse of ΔX = 10 (Increase in exports) and further induced increases in local incomes the new induced demand curve changes to P = 150 - 2Q. Where are the local GDP and the corresponding income multiplier if...
Demand for bowling balls in a market is given by the equation P = 20-2q. The...
Demand for bowling balls in a market is given by the equation P = 20-2q. The cost of each ball is $4. a) If firm A is the only firm in the market, how many balls will A produce? b) If firm B joins the market what is the equation for B’s reaction line? c) If both A and B are in the market, what is the equation for firm A’s reaction line? d) What is the Cournot equilibrium quantity...
1. Suppose that weekly demand for coal is given by P = 1800 – 2Q, and...
1. Suppose that weekly demand for coal is given by P = 1800 – 2Q, and supply is given by P = 4Q, where Q represents tonnes of coal. To support consumers, the government has decided to impose a price ceiling of $800 per tonne. This suggests that _________ of _________ will result in this market. Following the price ceiling, consumer surplus will _______ by_______. 2. In the Australian market for tea, demand is given by P = 10 -...
Suppose that the industry demand curve is given by P = 120 – 2Q. The monopolist/incumbent...
Suppose that the industry demand curve is given by P = 120 – 2Q. The monopolist/incumbent faces MCM=ACM=40. a) a) Solve for the profit-maximizing level of monopoly output, price, and profits. b) Suppose a potential entrant is considering entering, but the monopolist has a cost advantage. The potential entrant faces costs MCPE=ACPE=60. Assuming the monopolist/incumbent continues to produce the profit-maximizing quantity from part a), solve for the residual demand curve for the entrant. c) Assume the potential entrant follows the...
Industry demand is given by :   P = 100-2Q The total cost for the individual firm...
Industry demand is given by :   P = 100-2Q The total cost for the individual firm of which there are 4, is given by: TCi = 10qi + qi^2 If the 4 firms form a cartel what will be the price and output if the cartel is centralized and the cartel is decentralized As we know cheating is a problem with cartels what would happen to price and output if the cartel breaks down?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT