1. Suppose the market for widgets can be described by the following equations:
Demand: Q = 90-3P
Supply: Q = 10+P
Where P is the equilibrium price in dollars per unit and Q is the quantity in thousands of units.
What is the equilibrium price and quantity? Calculate the price elasticity of demand at the equilibrium price and quantity. Calculate the price elasticity of supply at the equilibrium price and quantity.
2. Suppose you are in charge of a toll bridge that is essentially cost free. The demand for the bridge crossing is given by P = 50-Q. Draw the demand curve for bridge crossings. How many people would cross the bridge if there were no toll? What is the loss of consumer surplus associated with the charge of a toll of $5.00?
3. The demand for wheat in the USA given by Demand: QUS = 900-20P, while the demand for wheat in Europe is given by QEU = 1800-30P. Derive and draw the aggregate demand schedule.