Estimate the price elasticity of demand and price elasticity of supply.
Consider a competitive market for which the quantities demanded and supplied (millions per year) at various prices are given as follows:
|
|
Quantity
|
Quantity
|
|
Price
|
Demanded
|
Supplied
|
|
60
|
22
|
14
|
|
80
|
20
|
16
|
|
100
|
18
|
18
|
|
120
|
16
|
20
|
a) Compute the price elasticity of demand at the prices 80, and 100.
b) Compute the price elasticity of supply at the prices 80, and 100.
c) Illustrate what is the equilibrium price and quantity? describe.
d) If there government were to set the price at 80, Discuss the impact on the market.