Question

The Boston Falafel sandwich market has the following supply and demand equations:
P = 22 - 3Q P = 2 + 2 Q
1)Draw the 2 curves on the same graph.
2)Find the equilibrium quantity and price.
3)Find the price elasticity of demand at equilibrium.
4)Find the price elasticity of supply at equilibrium.

Answer 1

Solution:

Given :

Demand Function : P = 22-3Q

Supply Function : P = 2+2Q

Solution 1

Graph of Demand and Supply Curve

Solution 2

Equlibrium Quantity and Price is the intersection of Demand and Supply Curve, that is where demand is equal to supply. That we can see graphically.

So Equilibrium Quantity is 4

Equilibrium Price is 10

Solution 3

Price Elasticity of demand at equilibrium is 0.83

Solution 4

Price Elasticity of supply at equilibrium is 1.25