Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are given as follows:
Price (dollars) Demand (millions) Supply (millions)
60 22 14
80 20 16
100 18 18
120 16 20
a. Calculate the price elasticity of demand when the price is $80 and when the price is $100.
b. Calculate the price elasticity of supply when the price is $80 and when the price is $100.
c. What are the equilibrium price and quantity ?
d. Suppose the government sets a price ceiling of $80. Will there be a shortage, and if so, how large will it be?