1. Farm Feeds is an animal feed supply business in a rural region of country X. The business operates in a competitive market where the price (P) of wheat hay (Q) is determined by the forces of demand and supply. The demand function (Q^D) and supply function (Q^S) for hay bales represented by the following equations:

Q^D = 80 - 10P

Q^S = 20 + 10P

Assume that the price in the market can range from P = $1 to P = $7, answer the following questions by completing the attached table 2:

1. a. What is the quantity demanded at the given price range?
2. b. What is the quantity supplied at the given price range?
3. c. What is the equilibrium price?
4. d. What is the price elasticity of demand at each price demand point?
5. e. What is the price elasticity of supply at each price supply point?
6. f. What is the total revenue to be collected at each price point?
7. g. What is the marginal revenue to be collected at each price point?
8. h. At what point is the price elastic, unitary elastic, and inelastic?

Table 2

Price

(P)

Quantity

Demand (Q^D)

Quantity

Supplied

(Q^S)

Total

Revenue

(TR)

Marginal

Revenue

(MR)

Price

Elasticity

of

Demand

(_D)

Price

Elasticity

of

Supply

(_S)

Is price inelastic, elastic, or unitary elastic?

1. i. The management team of Farm Feeds is contemplating fixing the price of hay bales at P = $5. What advice can you give them about this decision?