1. Supply and Demand. Elasticities.
Suppose you have the following information about the supply and demand in the market:
QD = 15000 – 500*P
QS = -6000 + 3000*P
a. What is the equilibrium price and quantity?
b. What would be the combination of price and quantity at which the elasticity of demand is equal to -1?
c. Suppose the supply function changes to QS = -1000 + 3000*P. Is this an increase or decrease of supply? What is the new equilibrium price and quantity?
d. Calculate the point elasticities of supply and demand at the equilibrium prices you found in a. and c.!