Economics 10

Problem Set 2
Deadline:
September 29, Thursday
I.

Elasticity of Demand.
1.
Scenario
A
B

Price
1600
1580

Quantity
400
900

a. Solve for the Elasticity of Demand

b. True or false: The product is most probably a necessity.
2.

Scenario
Price
A
1600
B
1620
a. Solve for the Elasticity of Demand

Quantity
400
390

b. True or false: The product is most probably a necessity.

II.

Illustration and Computation

1. Given the following equations:
Q d = 30 P
Q s = 5 + 4P
Where:
Qd = Quantity demanded of rice (in 000 kgs/mo)
Qs = Quantity supplied of rice (in 000 kgs/mo)
P = Price of Rice (Php/kg)
a. Solve for the equilibrium price and quantity. Draw a graph of the
supply and demand. (*Note: In the equilibrium point, the supply is
equal to the demand.)
b. If a price ceiling of Php4/kg is imposed, what will happen? How much
is the surplus or shortage.