Figure 2.6.2 -When Demand Is Written as Q = a - BP

question 68

Multiple Choice

Figure 2.6.2
-When demand is written as Q = a - bP, and P* and Q* are the equilibrium values for price and quantity, which of the following is the value of the price elasticity of demand, E_D?

• A) -a(P*/Q*)
• B) -b(P*/Q*)
• C) -a/b
• D) -b/a

---

Definitions:

Crystal Ball

A metaphor often used to describe the attempt to predict or foresee future events or outcomes, especially in uncertain situations.

Shadow Price

The implied worth or value of a resource that is not priced by the market, often used in cost-benefit analysis or optimization problems.

Nonlinear Optimization Models

Mathematical models where the objective function or any of the constraints are nonlinear, used to find the optimal solution under given nonlinear conditions.

Lagrange Multiplier

A strategy used in optimization problems to find the maximum or minimum of a function subject to constraints.