Question
Assignment on Elasticity of Supply and Demand
The market for your company’s product has the following demand and supply schedules:
Price Quantity Demanded Quantity Supplied
$4 135 26
5 104 53
6 81 81
7 68 98
8 53 110
9 39 121
a)Calculate the price elasticity of demand and supply using the base formula when price changes from $5 to $7 and identify that whether these are price elastic, inelastic or unit elastic. Use the following formula to calculate the elasticity of demand and supply and report the differences if any. If there are no differences then please tell why not?
E = (?Q/?P) (P/Q)
b) Calculate the priceelasticityof demand and supply using mid-point formula when price changes from $5 to $7 and identify that whether these are price elastic, inelastic or unit elastic.
c) Calculate the priceelasticityof demand and supply using mid-point formula when price changes from $7 to $5 and identify that whether these are price elastic, inelastic or unit elastic.
d) Interpret the results of calculated elasticities in (b and c) and if price is increased by 5% what would be the changes in quantity demanded and supplied.
