18. Suppose the supply curve and the demand curve both have unitary elasticity a

Question

18. Suppose the supply curve and the demand curve both have unitary elasticity at all prices. The price increase to consumers resulting from a specific tax of $1 imposed on sellers will be

A) $1.

B) 50 cents.

C) zero.

D) impossible to calculate without knowing the slope of the supply curve.

14. If the supply curve for orange juice is estimated to be Q = 40 + 2p, then, at a price of $2, the price elasticity of supply is

A) .01.

B) .09.

C) 1.

D) 11.

LET ME KNOW HOW TO SOLVE THIS, NOT ONLY GIVE THE ANSWER

Explanation / Answer

18. unit elasticity means that with a unit change in price of the good, both, the supply and demand quantity change by one unit. A unit increase in price will reduce the demand by 1 unit and a unit increase in price will increase the supply by one unit, hence no change. c) zero

14. Price elasticity of supply = Change in quantity supplied/ Change in price = dq/dp *p/q= 2 *2/44 = 0..09

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