Please show work and steps Demand for pretzels is: Qd = 10,250 - 5000 P Supply i

Question

Please show work and steps

Demand for pretzels is: Qd = 10,250 - 5000 P Supply is: Qs = -1000 + 4000 P Find the equilibrium price and quantity, and graph the functions. What is the lowest price that producers would ever sell pretzels for? What is the highest price consumers would ever be willing to pay? Also solve for total revenue, and shade it in on your graph. Now find the price elasticity of demand at the equilibrium point. If the price of pretzels increased by 1%, what is the new quantity demanded? What is the new total revenue? (Plug the new higher price into the Qd function to solve for these $ values, then verify the percent change in Qd and TR) Find the elasticity of supply at our original equilibrium point in part a. Is supply elastic, inelastic or unitary elastic at this point?

Explanation / Answer

Qd = 10,250 - 5000*P ;

Qs = -1000 +4000*P ;

At equilibrium

Qd = Qs ;

9000*P = 11250 ;

P = $1.25 ;

Q = 4000

Lowest price Qs = 0 ;

P = 1000/4000 = $0.25 ;

Highest Price : Qd = 0

P = 10250/5000 = $2.05 ;

Total Revenue = P*Q = 4000*1.25 = $5000 ;

b)

dP/P = 0.01

dQ/dP = -5000;

at Equilibrium Q = 4000 ; P = 1.25 ;

so elasticity = (dQ/dP)*(P/Q) = -1.5625

dQ/Q = -1.5625*0.01

dQ = -62.5

New Quantity cdemanded = 4000-62.5 = 3937.5

NewTotal Revenue = 0.99*1.25*3937.5 = $4872.65

c) dQ/dP = 4000 ;

P =1.25

Q = 4000

elasticity = (dQ/dP)*(P/q) = 1.25 ;

Elastic

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---