Market for good A 34 F Given: QD = 40-Price: Qs = Price; Complete the graph at t
ID: 1117829 • Letter: M
Question
Market for good A 34 F Given: QD = 40-Price: Qs = Price; Complete the graph at the top of the page using the Qo and Qs equations given above by filling in the. BLANKS (8 points). Using the midpoint method, calculate the price elasticity of demand for Good A over the price range of 30 to 34. (3 points) The Income Elasticity for good A is +2 and consumer's income decreases by 10%. Assuming that Good A is in equilibrium as graphed above and the price of Good A remains constant, what is the new quantity of good A demanded? (4 points)Explanation / Answer
Qd = 40 - P
Qs = P
equlibrium at Qd = Qs
40 - P = P
2P = 40
P = 40/2
= 20
Q = 20
At first
on vetical axis shows price
next box (0 , 40 )
equilibrium P = 20
origin (0,0)
Horizontal axis
equlibrium Q = 20
quantity demand
downwaed sloping curve is demand curve
upward sloping curve is supply curve
intercept of demand curve with x axis (40,0)
b)
P Q
30 10
34 6
Ed by mid point formula
Ed = [(Q2 - Q1)/(P2 - P1)][(P2+P1)/(Q2+Q1)]
= (34 - 30)/(6-10)][(6+10)(34+30)]
= - 0.25
C) income elasticity = % change in Q/%change in income
2 = % change in Q /10%
% change in Q = 20 %