Reference no: EM132559553
Consider a market for golf balls, described by the following supply and demand functions
qS = -6 + 2p
qD = 14 - 3p
(a) Plot the demand and supply curves with prices on the vertical axis and quantity on the horizontal axis. (Hint: Don't forget the convert the given demand and supply functions to inverse demand and inverse supply functions with P on the left side only.) Clearly label the axis and the curves.
(b) What are the equilibrium price and quantity in this market? Can you show them in the plot you made in part (a).
(c) Calculate the Consumer Surplus, Producer Surplus, and Total Welfare levels. Show these in your plot for part (a).
(d) At the equilibrium price and quantity, what is the price elasticity of demand?
(e) Interpret the price elasticity of demand. If the owner of the firm wanted to maximize revenue, would they prefer a higher, lower, or the same price?
(f) Does a firm always want to maximize revenue? Explain why or why not