To find the price elasticity of demand (Ep) and the price elasticity of supply (Es) from the given supply and demand functions, we need to use the following formulas:
Ep = (% Change in Quantity Demanded) / (% Change in Price)
Es = (% Change in Quantity Supplied) / (% Change in Price)
To find the values of Ep and Es, we need to differentiate the demand and supply functions with respect to price:
Qd = 1800 - 5P
dQd/dP = -5
Qs = -400 + 5P
dQs/dP = 5
Next, we need to find the values of Q, P, and Y to calculate the elasticity. Let's assume that Q = 1000, P = 200, and Y = 500.
Now, we can calculate the values of Ep and Es:
Ep = (% Change in Quantity Demanded) / (% Change in Price)
= (dQd/dP * P/Q)
= (-5 * 200 / 1000)
= -1
Es = (% Change in Quantity Supplied) / (% Change in Price)
= (dQs/dP * P/Q)
= (5 * 200 / 1000)
= 1
Therefore, the price elasticity of demand (Ep) is -1, and the price elasticity of supply (Es) is 1.
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Answer:
To find the price elasticity of demand (Ep) and the price elasticity of supply (Es) from the given supply and demand functions, we need to use the following formulas:
Ep = (% Change in Quantity Demanded) / (% Change in Price)
Es = (% Change in Quantity Supplied) / (% Change in Price)
To find the values of Ep and Es, we need to differentiate the demand and supply functions with respect to price:
Qd = 1800 - 5P
dQd/dP = -5
Qs = -400 + 5P
dQs/dP = 5
Next, we need to find the values of Q, P, and Y to calculate the elasticity. Let's assume that Q = 1000, P = 200, and Y = 500.
Now, we can calculate the values of Ep and Es:
Ep = (% Change in Quantity Demanded) / (% Change in Price)
= (dQd/dP * P/Q)
= (-5 * 200 / 1000)
= -1
Es = (% Change in Quantity Supplied) / (% Change in Price)
= (dQs/dP * P/Q)
= (5 * 200 / 1000)
= 1
Therefore, the price elasticity of demand (Ep) is -1, and the price elasticity of supply (Es) is 1.
Explanation: