The following are market demand and supply equations for a perfume product: QD = 70 − 4P QS = 10 + 2P where P is, QD and QS are quantity demanded and supplied of perfume, respectively. C) Suppose consumers’ income increases and perfume is considered as a normal good. As a result, the new demand equation is QD = 100 − 4P. Find the new equilibrium price and quantity of perfume. D) Your economist friend told you that because of the change in demand described in part (c), price elasticity of demand changed. Is your friend right? Explain. E) Use the demand equation in part (c) to compute price elasticity of demand between £5 and £6. Use the mid-point (arc) method.
The following are market demand and supply equations for a perfume product: QD = 70 − 4P QS = 10 + 2P where P is, QD and QS are quantity demanded and supplied of perfume, respectively. C) Suppose consumers’ income increases and perfume is considered as a normal good. As a result, the new demand equation is QD = 100 − 4P. Find the new equilibrium price and quantity of perfume. D) Your economist friend told you that because of the change in demand described in part (c), price elasticity of demand changed. Is your friend right? Explain. E) Use the demand equation in part (c) to compute price elasticity of demand between £5 and £6. Use the mid-point (arc) method.
Chapter5: Markets In Motion And Price Controls
Section: Chapter Questions
Problem 10P
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The following are market demand and supply equations for a perfume product:
QD = 70 − 4P
QS = 10 + 2P
where P is, QD and QS are quantity demanded and supplied of perfume, respectively.
C) Suppose consumers’ income increases and perfume is considered as a normal good. As a result, the new demand equation is QD = 100 − 4P. Find the new
D) Your economist friend told you that because of the change in demand described in part (c), price
E) Use the demand equation in part (c) to compute price elasticity of demand between £5 and £6. Use the mid-point (arc) method.
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