ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It will fall by $2
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It will fall by $6
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It will rise by $2
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It will rise by $6
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Detailed explanation-1: -To find the equilibrium price a mathematical formula can be used. The equilibrium price formula is based on demand and supply quantities; you will set quantity demanded (Qd) equal to quantity supplied (Qs) and solve for the price (P). This is an example of the equation: Qd = 100-5P = Qs =-125 + 20P.
Detailed explanation-2: -The result of the price floor is that the quantity supplied, Qs, exceeds the quantity demanded, Qd. There is excess supply, also called a surplus.
Detailed explanation-3: -You use the supply formula, Qs = x + yP, to find the supply line algebraically or on a graph. In this equation, Qs represents the number of supplied hats, x represents the quantity and P represents the price of hats in dollars. Assume that at a price of $1, the demand is 100 hats.