Question

Assume the market for beef is described by the following demand and supply functions:

Q(p) = -6 + 6p …………………………………

Q(p) = 50 – 2P^2 …………………………………

(a)Which of the two equations is the demand curve? How did you know?

(b)Find the equilibrium price ($) and equilibrium quantity transacted (000 lb.)in this market.

(c)Determine the price elasticity of demand at equilibrium for this product.

(d)Suppose the adoption of a new technology allows this beef producer to increase supply by 4, how will this affect current equilibrium conditions in this market?

Answer 1

SOLUTION:-

1) Q = -6 + 6P

and   Q = 50 - 2P

a) The demand curve is having Negative Slope:-

----> demand curve

b) For equilibrium:-

Demand = Supply

50 - 2P = -6 + 6P

56 = 8P

P = $7

------> equim price

and

Q = 50 - 2P

= 50 - 2 7

Q = 36

---------> equim quantity

c) PED in differential equation is given by:-

  

  

PED = -0.38

d)

* Is there is new technological advancement in the production of beef then supply curve for beef will shift right.

* When supply curve shifts right then equilibrium price dcrease in equilibrium quantity increase.

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