# Why is Equilibrium Price And Price Elasticity Of Demand

Saturday December 11, 2021

Any matched results will be considered cheating, so it results into ZERO grade. • Show all works for calculation, final result will not be accepted without showing how you reach to it. • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. • Assignments submitted through email will not be accepted. • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. • Students must mention question number clearly in their answer. • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. • All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). • Submissions without this cover page will NOT be accepted. Q1. Consider an example of the Saudi clothing market; if the supply and demand represented as: Qs = – 200 + 4p ; Qd = 800 – p Solve: a) Equilibrium price and equilibrium quantity and calculate total revenue? b) If there were a price celling equal to 250 SAR per each cloth imposed, calculate the price elasticity of demand? Does this consider elastic, inelastic or unit elastic? Also, calculate the total revenue? c) Now consider the shoes market; if the supply and demand is: i. Qs = -100 + 3p ; Qd = 800 – 6p, calculate the equilibrium price and equilibrium quantity. Also, calculate Total Revenue. ii. If there were a price celling of 120 SAR imposed per each pair of shoes, calculate the price elasticity of demand? Does the shoes consider elastic, inelastic or inelastic or unit elastic? Also calculate total revenue. Hint; plug the new price on the demand curve formula, then find the new quantity demand after change in prices, after that solve for the elasticity by comparing the percentage changes in P & Qd d) Compare the total revenue for the clothing market and the total revenue you found on the clothing market. Which one of product’s total revenue has been increased after the price have been increase and why? e) Recall part a (the cloth market) Calculate the CS & PS. Hint; you need to set Qs=0 & Qd=0 then solve for P to find the intercept and calculate the CS, PS.

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