DRQ #4 AGEC 317 4pts September 12, 2013

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DRQ #4 AGEC 317 4pts September 12, 2013 Given the demand function, Q = 8000 – 400P: (½pt) (a) What is the inverse demand function? (½pt) (b) Derive the expression for total revenue in terms of quantity. (½pt) (c) Calculate the general expression for the own-price elasticity in terms of P and Q. (½pt) (d) If P = $7, what is the own-price elasticity? (½pt) (e) Is the demand for the commodity inelastic or elastic? Q 400 P=20-.0025Q or P=20- TR=20Q-.0025Q2 Max TR=40,000 DQ P DP Q -400P Q = -400(7) 5200 =-.538 Inelastic

DRQ #4 AGEC 317 4pts September 12, 2013 Given Qd = 300,000 – 1,200P, Qs = -100,000 + 800P: (½pt) (a) What is the market equilibrium price? (½pt) (b) What is the market equilibrium quantity? (½pt) (c) What happens when P = $150? Solve Qd=Qs=> 300,000-1, 200P=-100,000+800P 400,000 = 2,000P P = 200 Q=60,000 Qd=120,000; Qs=20,000 Qd>Qs Shorage