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For Industry-G, the relationship between price (Pd) and quantity demanded (Qd) is described through the demand function while the relationship between price (Ps) and quantity supplied (Qs) is described through the supply function as given below: Demand: ???? = 50 - 3????.
Supply: ???? = 20 + 2???? .
(a) Find the equilibrium quantity (Qe) and price (Pe).
(b) Find the elasticity of demand (Ed) and supply (Es) when the price decreases by 2 from the established (Pe) in (a):
(c) Should the seller decrease the price by 2 units as done in (b)? Hint: Consider changes in total revenue.
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