Wednesday
April 16, 2014

Homework Help: Economics

Posted by Candice on Wednesday, April 10, 2013 at 1:30am.

Hi,

The demand for inflatable garden gnomes is given by P = 300 2Q, while the supply of is P= 100 + Q/2. How many garden gnomes are traded in equilibrium?

I found the answer to be Q = 80.
The related question was the one I had difficulty with:

Suppose that the market for gnomes is yet to reach equilibrium, and that the current price and quantity in the market for gnomes in the previous question is P = 150 and Q = 75. What is the absolute value of the elasticity of demand at this point on the demand curve? (Remember to rearrange the demand curve!)

The multiple choices given were 0.5, 0.25, 2, 4 or 1. However I seem to keep getting 0.875 using the price elasticity formula.

Thanks!

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