Problem 1:
The following relations describe the supply and demand for posters.
Qd = 65000- 10000 P
Qd = -3500 + 15000 P
Where Q is the quantity and P is the price of the posters, in dollars.
A. Complete the following table.
Price Qs Qd Surplus or Shortage
$.6.00
5.00
4.00
3.00
2.00
1.00
B. What is the equilibrium price?
Problem 2:
The for a demand curve has been estimated to be Q- 100 - 10P +.05Y, where Q is quantity, P is price, and Y is income. Assume P = 7 and Y=50.
a. Interpret the equation.
b. At a price, what is income elasticity?
c. At an income level of 50, what is income elasticity?
d. Now assume income is 70. What is the price elasticity at P=8?