Consider the supply curve Q^s = 2P and the demand curve Q^d = 90 - P. Which expression best shows how you would calculate the elasticity of demand when P increases by 1 along the demand curve from its equilibrium value? A) [(59 - 60)/ (31 - 30)] x (30/60) B) [(56 - 60)/ (31 - 30)] x (30/60) C) [(59 - 61)/ (31 - 30)] x (30/60) D) [(59 - 62)/ (32 - 30)] x (30/60)

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Quizplus · Accepted Answer

The equilibrium price is found where Q^s = Q^d, so 2P = 90 - P, giving P = 30. At P = 30, Q^d = 60. When P increases by 1 to 31, Q^d = 59. The elasticity of demand is calculated as [(59 - 60)/ (31 - 30)] x (30/60).

Consider the Supply Curve Qs = 2P and the Demand

Consider the Supply Curve Q^s = 2P and the Demand