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Demand & Supply, Solved Questions

1- Solved Questions

1- Given that: Qd/1500 + P/1500 = 1 and Qs = 4P, what is quantity supply or quantity demanded?

Given the demand function,

Given the supply function `Qs = 4P.....(ii)`
For equilibrium, Qd must be equal to Qs, 
Or, `Qd = Qs .......(iii)`
Substituting the demand and supply functions in equation (iii) we get,

`1500 - P = 4P`
`Hence P = 300`

Substituting 300 for P in demand or supply function we get,
if you substitute in the demand function you get,
Hence, Qd or Qs is equal to 12oo.

2- If the quantity demanded of a commodity reduces from 20 units to 10 units in response to an increase in price from $10 to $20, what is the coefficient of price elasticity?

Given, `\P1=10\&\P2=20`
As we know that price elasticity demand is,

3- Given the demand function `Q=-110P+0.32I`, where P is the price of the good and I is the consumer's income. What is the income elasticity of demand when income is 20,000 and the price is $5?

As we know that  income elasticity of demand is;
In the above problem, initial income and quantity are not given. Hence, `\eI=\frac{\triangleQ}{\triangleI}` can be calculated by differentiation method.

Note:- Income elasticity of demand states the responsiveness in quantity demanded of a good due to a change in income of consumers. Hence, P in the above demand function can be substituted by $5, and the demand function changes to;

Differentiating both sides with respect to I we get;

Now, let us assume, initial quantity is: `Q=-550+0.32I`
Initial income is: `20,000`

Now, let us plot the value in the following formula.


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