Question 1. A product's Demand Curve is : Qd = 50 - 2P, and Supply Curve is Qs= 40 + P.
a. When P=$10, what is the difference, if any, between Qd and Qs?
b. When P=$2, what is the difference , if any, between Qd and Qs?
c. What are the equilibrium values of P and Q?
Question 2. The demand curve is: Qd = 500 - 1/2P.
a. Calculate the (point) price elasticity of demand when price is $100. Is demand elastic or inelastic?
b. Calculate the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic?
c. Find the point at which point elasticity is equal to -1.
Question 3. Demand and supply in the wheat market are given by:
Qd = 2000 - 1000P
Qs = -500 + 1000P
Where Q is millions of bushels and P is price per bushel.
a. Find the equilibrium price and quantity.
b. Suppose that the government wishes to support farm income and thus sets a price floor of $1.50/bushel. Find the size of the farm surplus.
c. What is the cost of this program to the government?