Question

Consider the following weekly supply and demand tables for product X:

                                    P                                            Q_d                                  Q_s

                                                                                                                                   

                                      2                                            8                                    3

                                    3                                            7                                     4

                                    4                                            6                                     5

                                      5                                            5                                     6

                                    6                                              4                                     7

                                    7                                            3                                      8

                                    8                                             2                                      9

                                    9                                            1                                      10

                                    10                                          0                                      11                           

           a.         Draw the supply and demand curves on the same diagram. Determine the equilibrium price and quantity numerically and demonstrate graphically.

             b.        On the same diagram, show the new equilibrium P & Q when Supply and                                                  demand has each decreased by 1.

c.         On the same diagram relying the original data demonstrate the impact of the government price controls set at P = 5. Use the original Supply and demand data for this question.

d.        Calculate the Elasticity of Demand when Price moves from $7 to $6. Is demand elastic or inelastic in this price range? Why? Use the Point Elasticity formula.

e.         Redraw the demand curve. Geometrically demonstrate the revenue change when price moves from 7 to 4. Show loss and gain and indicate elasticity based on the Loss and gain information.

f.          Using the original supply and demand data, demonstrate the Consumer Surplus at the equilibrium Price. You may redraw the Demand curve and use only that, as you KNOW what the equilibrium price is.

Answer 1

As this question recquires frequently plotting graph and showing the shaded regions so I am providing a handwritten solution. I hope this solution is sufficient to clear any doubt. Please do a thumps up if this solves your problem and do ask if any doubt occurs.