Question

PLEASE ANSWER ALL

15) Which of the following is certainly true if demand and supply increase at the same time? a. The equilibrium price will increase. b. The equilibrium price will decrease. C. The equilibrium quantity will increase. d. The equilibrium quantity will decrease. e. The equilibrium quantity may increase, decrease, or stay the same.

16) If a decrease in price from $2 to $1 causes an increase in quantity demanded from 100 to 120, using the midpoint method, price elasticity of demand equals a. 0.17 b. 0.27 C. 0.40 d. 2.5 e. 3.72

17) If a 2% change in the price of a good leads to a 10% change in the quantity demanded of a good, what is the value of price elasticity of demand? a. 0.02 b.0.2 c. 5 d. 10 . 20

Answer 1

16. An increase in both demand and supply cause the equilibrium quantity to increase but the change in price is uncertain. Whether the equilibrium price increase or decrease is uncertain. If the increase in demand is greater than the increase in supply, the equilibrium price will increase or if the increase in supply is larger than the increase in demand the equilibrium price will fall. But the increase in equilibrium quantity is definite.

C. the equilibrium quantity will increase.

17. Under midpoint method, the price elasticity of demand = Percentage change in quantity demanded/Percentage change in price.

The percentage change in quantity demanded = Q2-Q1/(Q2+Q1)÷2×100

The percentage change in price = P2-P1/(P2+P1)÷2×100.

Q1 and P1 are initial quantity and price, Q2 and P1 are new quantity and price.

%change in price = 1-2/(1+2)÷2×100= 66%

%change in demand = 120-100(120+100)÷2×100= 18.18%

PED= 18.88/66= 0.27

B. 0.27.

17. PED= 10/2=5.

C. 5.