Managerial Economics Homework #1 Questions

The market for Oil is competitive.1—what are the four conditions required for a market to be competitive?2—if the demand is P = 240 – 0.5Q & supply is P = 15 + 2Q, what is the equilibrium price and quantity in this market?3–Calculate the elasticity of demand at a price of 90 (this is not the price in #1). Give an economic interpretation to your answer. Is demand elastic, unit elastic or inelastic at this price?4– To enable more citizens to buy more gasoline, the Government decides to give gasoline producers a subsidy of $9 per unit– Using the supply and demand equations from #1. What price will consumer’s pay and how much gasoline will they buy? How much will the Government spend on the subsidy? What will be the change in producer surplus?