Help with some Micro Calculations Please?

[Jackass]

Hi, just trying to do some revision problem sets and I just wanted clarification on if I'm going in the right direction.

So I have one question:

Qd = 1800 - 2P(squared) + 4P
Qs = 3P(squared) + 4P - 200

Question is what is elasticity of supply in equilibrium?

So I put Qd = Qs and solve P as 20 and Qd and Qs both as 1,080

My problem is now finding the elasticity of supply

Do I manipulate Price in this instance? So let P = 30 and I get Qs = 2,620

%changeP = 0.5% and %changeQs = 1.43%

%changeQs/%changeP = 2.86 and this is the elasticity of supply?

The only reason it's throwing me is that it is giving multiple choice answers of A) 62/27 or 2.296 20 C) 1/54 or 0.185 D) 1080 or E) None of the above

I would go with none of the above, but am thrown by it if I can't match the answer!! :shock: I'm just not sure if above method is finding price elasticity or supply elasticity, as if I was to manipulate supply number I'm not sure how to go about it...

Ok, a second one (and I really should know this, but am rusty as hell)

Qd = 900 - 3P
Qs = 2P - 100

If tax of 25 is introduced, how much Revenue will Government earn?

So I solve P = 200 and Qd and Qs = 300

So I solve Qs as 2(P-T) - 100 (from given equation)
Qs = 250

And then multiply Qs with tax (250) by T (25) and get 6250 as Revenue, however, once again, this is not one of the options on the multiple choice, with answers given as A) 1850 7,500 C) None of these D) 4625 E) 6750

Care to let me know if I'm doing it right or where I'm going wrong please?

Also, how do I calculate who would bear the burden of tax? IIRC, it is always shared jointly between Consumer and Supplier? Is this the case, or can it be entirely on the Supplier or the Consumer, and if it can differ, how do I calculate this?

Thanks a million for help, was sick last week so trying to catch up with what I missed.

Cheers.

Chucky the tree

On the first one afaik elasticity of supply is just price elasticity of supply. Which is price over quantity multiplied by a change in quantity over a change in price. So it should be 20/1080. Which is 1/54


On the second question you should be using the Qd function to plug in the tax. The price consumers pay is the price of the good and the tax. The tax burden is always passed onto to the consumer. Qd is the amount consumers are willing to pay at a certain price, so to we need to add price and tax together to find out what quantity of goods they will buy at that price.


Here's it done out, but I'll spoiler the answer if you want to give a go yourself first. You should find the Qd first with the cost of the and tax included so figure out what Qd = 900 - 3(p+t) will be if yo

I do it this way, get the Qd function first and include the tax before solving so
Qd= 900 - 3(p+t) t= 25
Qd = 900 - 3p - 75
Qd = 825 - 3p

That's our demand function when we factor in tax

Qd=Qs
825 - 3p = 2p - 100
5p = 925
p = 185

25*185 = 4,625

Option D is right

.

[Jackass]

Thanks a million, very much appreciated!