Question

Consider a perfectly competitive market described by the supply function P = 10 + 0.2Q and demand function P = 60 - 0.3Q. Using the standard formula (versus the mid-point formula) for calculating elasticities, it may be concluded that at the equilibrium price and quantity:

Answer 1

In a perfectly competitive market, the equilibrium price and quantity are determined by the intersection of the supply and demand curves. At this equilibrium point, the quantity demanded is equal to the quantity supplied.

Step-by-step explanation:

In a perfectly competitive market, the equilibrium price and quantity are determined by the intersection of the supply and demand curves. At this equilibrium point, the quantity demanded is equal to the quantity supplied.

Using the standard formula for calculating elasticities, we can determine the elasticity of supply and demand at the equilibrium price and quantity. For the supply curve, the elasticity value is greater than one, indicating that it is elastic.

In this case, the equilibrium price is $1.40 and the equilibrium quantity is 600 units.