Deriving demand curve with only price, quantity and elasticity
4. The market for pizzas in Melbourne has an equilibrium price of P
= $18
and quantity Q = 100000. The own price elasticity of demand when
prices increase by $1 is Ed = 1:5
(a) Derive the demand curve for pizza assuming that it is linear.
(b) Calculate the consumer surplus.
(c) Suppose Melbourne hosts a major sporting event and an influx of
tourists adds the following demand: Qtourists = 30000 - 1000P.
Draw the original demand curve and show the new demand curve
when the tourists demand is added. (Hint: It may help to manipulate
the demand curve with price on the left for both the original
and tourist demand.)
(d) If the equilibrium price does not change, what is the new consumer
surplus?
