. Consider the market for umbrellas in Pasadena. P= 125-40⁰ P = 25+ QS a. What is the equilibrium price and quantity of umbrellas in this market? b. If the government sets the price for umbrellas at $80, describe the affect this will have on the quantity sold, and indicate if this is a price ceiling or a price floor. c. What is the elasticity of demand at the equilibrium if the price increases by $10? d. Is demand elastic, inelastic or unit elastic?

. Consider the market for umbrellas in Pasadena. P= 125-40⁰ P = 25+ QS a. What is the equilibrium price and quantity of umbrellas in this market? b. If the government sets the price for umbrellas at $80, describe the affect this will have on the quantity sold, and indicate if this is a price ceiling or a price floor. c. What is the elasticity of demand at the equilibrium if the price increases by $10? d. Is demand elastic, inelastic or unit elastic?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 5CQQ: An increase in the supply of a good will decrease the total revenue producers receive if a. the...

See similar textbooks

Similar questions

Explain why using the midpoint formula for calculating the elasticity of demand gives the same result whether price increases or decreases, but using the initial price and quantity instead of the average does not.
The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: There were nearly four million fewer riders in December 1995, the first full month after the price of a token increased 25 cents to 1.50, than in the previous December, a 4.3 percent decline. a. Use these data to estimate the price elasticity of demand for subway rides. b. According to your estimate, what happens to the Transit Authoritys revenue when the fare rises? c. Why might your estimate of the elasticity be unreliable?
The equation for a supply curve is P=3Q8. What is the elasticity in moving from a price of 4 to a price of 7?
The price of coffee rose sharply last month, while the quantity sold remained the same. Five people suggest various explanations: Leonard: Demand increased, but supply was perfectly inelastic. Sheldon: Demand increased, but it was perfectly inelastic. Penny: Demand increased, but supply decreased at the same time. Howard: Supply decreased, but demand was unit elastic. Raj: Supply decreased, but demand was perfectly inelastic. Who could possibly be right? Use graphs to explain your answer.
If the elasticity of demand for hamburgers equals 21.5 and the quantity demanded equals 40,000, predict what will happen to the quantity demanded of hamburgers when the price increases by 10 percent. If the price falls by 5 percent, what will happen?
If supply is elastic, will shifts in demand have a larger effect on equilibrium quantity or on price?
Can you think of an industry (or product) with near infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?
An increase in the supply of a good will decrease the total revenue producers receive if a. the demand curve is inelastic. b. the demand curve is elastic. c. the supply curve is inelastic. d. the supply curve is elastic.
The equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?
Explain why the following statement is false: In the goods market, no seller would be willing to sell for less than the equilibrium price.
The supply of paintings by Leonardo Da Vinci, who painted the Mona Lisa and The Last Supper and died in 1519, is highly inelastic. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that demand for these paintings will determine the price.
If demand is elastic, will shifts in supply have a larger effect on equilibrium quantity or on price?