ECO402 Solution
Monday, February 01, 2010 Posted In Eco Edit This
(A)
Market clearing price condition
Quantity demanded = Quantity supplied
1600-125p = 440+165p
1600-440 = 165p+125p
1160 = 290p
P = 1160/290
Now: P = 4
Now putting values in the quantity demanded side or supply side
we are putting values in the quantity demanded side
Qd = 1600-125p
= 1600-125(4)
Qd = 1100
Part (b) P = 5.50
Then
Qd Qs
= 1600-125p = 440+165
= 1600-125(5.50) = 440+165(5.50)
Qd = 912. 5 Qs = 1347.5
Part (c) Now
Excess supply = Qd –Qs
= 912 .5 -1345.7
= -435
(Q =435) This quantity will Government buy
Part (B) P = 70$ , MC = 50
P =MC/1+ (1/Ed)
Elasticity of demanded is equal to Marginal Cost, Marginal cost is equal to price
So are all equal on equilibriums point
Ed = MC = P
We find “Ed”
MC = 50 , P =70
Ed = MC - P = 50 – 70 here is some dought
Ed = -20[/color][/b]
Market clearing price condition
Quantity demanded = Quantity supplied
1600-125p = 440+165p
1600-440 = 165p+125p
1160 = 290p
P = 1160/290
Now: P = 4
Now putting values in the quantity demanded side or supply side
we are putting values in the quantity demanded side
Qd = 1600-125p
= 1600-125(4)
Qd = 1100
Part (b) P = 5.50
Then
Qd Qs
= 1600-125p = 440+165
= 1600-125(5.50) = 440+165(5.50)
Qd = 912. 5 Qs = 1347.5
Part (c) Now
Excess supply = Qd –Qs
= 912 .5 -1345.7
= -435
(Q =435) This quantity will Government buy
Part (B) P = 70$ , MC = 50
P =MC/1+ (1/Ed)
Elasticity of demanded is equal to Marginal Cost, Marginal cost is equal to price
So are all equal on equilibriums point
Ed = MC = P
We find “Ed”
MC = 50 , P =70
Ed = MC - P = 50 – 70 here is some dought
Ed = -20[/color][/b]
