Prices are determined by demand and supply . Calculate the price at which demand is unit elastic. Provide a Supply and Demand Diagram to illustrate this calculation.
Supply
Demand
When is ?
So
Midpoint method:
Take your demand intercept:
So at , we have unit elasticity.
And take the Q-int's half point.
Another way to calculate is to differentiate the functions given:
The demand for good depends on the price of good : . The supply for good is . The price of good changes from to . Calculate the cross-price elasticity of demand for good at the original equilibrium price. Provide a Supply and Demand Diagram to illustrate this calculation.