1) The demand and supply for a particular commodity are given by the following two equations:
Demand: P = 20 – 2Q_{d}
and
Supply: P = 5 + 3Q_{s}
where Q_{d} and Q_{s} are quantity demanded and quantity supplied, respectively, and P is price.
Using the equilibrium condition Q_{s} = Q_{d}, determine equilibrium price and equilibrium quantity.
Equilibrium price: $ _______
Equilibrium quantity: ______ units
2) Suppose that the total revenue received by a company selling basketballs is $840 when the price is set at $60 per basketball and $840 when the price is set at $40 per basketball. Without using the midpoint formula, can you tell whether demand is elastic, inelastic, or unitelastic over this price range?
Demand is ___(elastic, inelastic or unit elastic)__ over this range.
3) What is the formula for measuring the price elasticity of supply?
E_{s} = a)percentage change in quantity demanded / percentage change in income
b)percentage change in quantity supplied / percentage change in price
c)percentage change in quantity demanded/ percentage change in price
Suppose the price of apples goes up from $23 to $25 a box. In direct response, Goldsboro Farms supplies 1500 boxes of apples instead of 1400 boxes. Compute the coefficient of price elasticity (midpoints approach) for Goldsboro’s supply.
Instructions: Round your answer to two decimal places.
E_{s} = _______
Is its supply elastic, or is it inelastic?
Supply is ___(inelastic or elastic)__
4) Given the following income elasticities of demand:
Product 
Income Elasticity 
Movies 
+3.4 
Dental services 
+1.0 
Clothing 
+0.5 
The values indicate that
a) a 10 percent increase in income will increase the demand for clothing by 20 percent. 

b) movies and dental services are normal goods, but clothing is an inferior good. 

c) a 5 percent increase in the price of dental services will decrease the demand for dental services by 5 percent. 

d) a 1 percent increase in income will increase the quantity of movies demanded by 3.4 percent. 
If the income elasticity coefficient is negative, it means that
a) the good is inferior so that if income falls, the quantity demanded of the good will rise. 

b) the good is inferior so that if price falls, the quantity demanded of the good will rise. 

c) the good is normal so that if price falls, the quantity demanded of the good will rise. 

d) the good is inferior so that if income falls, the quantity demanded of the good will fall. 
5) Refer to the table below. Fill in the surplusshortage column.
Instructions: In the table below, fill in the fourth column, Surplus (+) or Shortage (). If you are entering any negative numbers, be sure to include a negative sign () in front of those numbers.
Thousands of Bushels Demanded 
Price per Bushel 
Thousands of Bushels Supplied 
Surplus (+) 
85 
$3.40 
72 
Answer this___ 
80 
3.70 
73 
Answer this 
75 
4.00 
75 
Answer this 
70 
4.30 
77 
Answer this 
65 
4.60 
79 
Answer this 
60 
4.90 
81 
Answer this 
a. What is the equilibrium price in this market? $_______
At what price is there neither a surplus nor a shortage? $_________
b. Calculate the surplus or shortage at a price of $3.40 and at a price of $4.90.
When the price is $3.40, there is a ___________ of ___________ thousand bushels.
When the price is $4.90, there is a ___________ of ____________ thousand bushels.
Instructions: If you are entering any negative numbers, be sure to include a negative sign () in front of those numbers.
How big a surplus or shortage will result if the price is 60 cents higher than the equilibrium price?
_______________ thousand bushels
How big a surplus or shortage will result if the price is 30 cents lower than the equilibrium price?
________________ thousand bushels
Subject  Mathematics 
Due By (Pacific Time)  05/10/2015 11:00 am 
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