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QD = 1,600 – 125 * P QS = 440 + 165 * P You should...

QD = 1,600 – 125 * P
QS = 440 + 165 * P
You should have calculated the equilibrium in this market to be (P*, Q*) = ($4,
1,100).
a. Calculate the price elasticity of demand at the equilibrium. Is this elastic or
inelastic?
b. Calculate the price elasticity of supply at the equilibrium. Is this elastic or
inelastic?
c. Suppose the government sets a price floor of $4.50 in this market. What is the
quantity supplied at that price? What is the quantity demanded? Is this a
shortage or a surplus? How large is it?
d. Illustrate this graphically.

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