Question

#1 The market ties are competitive and demand is given by P=210-Q. If supply is given by P=2Q, what will be the price in this market and what quantity?

#2  Suppose that the administration requires all of its faculty and students to wear new ties every day. Draw a supply and demand graph of this situation indicating what will happen to the market price and quantity for the ties. Why does the price change in this market?

#3 When P=5, quantity is Q=100 When P=10, quantity is Q=55   What is the elasticity of demand? Show your work. What are the factors that determine the elasticity of demand? Just list these factors

Answer 1

1 [ Demand p = 210 - Q Supply, p=20 Im equilibrium, Demand = Supply 210 - Q = 28 2 Q = 70 P = 140 ᏁᎢ , ᏗᎩ , , Ꭻ , ᎰᎢ ᎬᏔ ) 11 n. If administration requires all its faculty and students to wear new ties everyday them demand for tie will increase shifting the demand were to the right . a Price Supply 1401 Demand Demand quantity

-- This right ward shift of demand come will increase both price and quantity of tie in the equilibrium. Price will change because initially when demand will start increasing, it will take some time for supply to increase and price will increase to show scarcity of the during that time due to high demand. Whem P = 5 d = 100 when P=10 9 = 55 Elasticity of demand = Percent change in Percent change in price = ( 55-100)/100 mm - (20-5)/5 = -95 x = -0.45 Factors affecting price elasticity of demand are income, price! nature of commodity and availability of substitutes