BUS 207 Study Guide - Quiz Guide: Marginal Revenue, Arc Elasticity, Price Elasticity Of Demand
1 Apr 2015
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Setting demand equal to supply yields 12. 4 - 4q = -2. 6 + 2q. P = 12. 4 -(4)(2. 5) = -2. 6 + (2)(2. 5) = . 40. The actual price need not be equal to equilibrium price, although it will generally tend to move toward it because of the equilibrating effects of shortage and surplus. Factors that might prevent the actual price from equaling the equilibrium price include the cost and availability of information, transportation costs, and a lack of opportunities for price equalizing arbitrage. Because the demand for lumber is derived in large part from the demand for new housing construction, a decline in construction would be likely to cause the demand for lumber to fall, leading to lower lumber prices. Supply would not be affected by changes in housing construction. 2: elasticity = (-3)(10/1110) = -3/111, elasticity = (0. 1)(6000/1110) = 60/111, elasticity = (2)(20/1110) = 4/111, the calculations assume that the population is constant, a.
