question archive Suppose the price elasticity of demand for accordions is 2
Suppose the price elasticity of demand for accordions is 2
Subject:EconomicsPrice:2.88 Bought3
Suppose the price elasticity of demand for accordions is 2.5 and the supply elasticity is 3.0. If a subsidy on accordions increases the supply by 15 percent, the equilibrium price will _____ by _____ percent.
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The elasticity of supply=change in quantity/change in price
Change in price=change in quantity/elasticity of supply
Change in price=15%/3
Change in price=5%
The supply curve will shift to the right, the equilibrium quantity and price will increase and decrease respectively
The equilibrium price will decrease by 5 percent
