1. Business
  2. Economics
  3. the market for a medicine is in equilibrium at 80...

Question: the market for a medicine is in equilibrium at 80...

Question details

The market for a medicine is in equilibrium at 80 thousand units a month. Each one is sold for $500. Suppose the own price elasticity of demand for this medicine is -0.8 and the price elasticity of supply is 1.5.

a. Compute the slope and intercept coefficients for the linear supply and demand equations.

b. If the government imposed a per unit subsidy of $40, what would be the new equilibrium price and quantity of this medicine?

c. Calculate and illustrate the changes in consumer, producer, and total surplus.

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution