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Q-Microeconomics Assignment 1 - HSS-01

This document contains a microeconomics assignment with 4 questions. Question 1 asks to calculate equilibrium quantity and price from given supply and demand curves, and consumer and producer surplus. Question 2 asks about the effect of taxes and subsidies on price and government surplus. Question 3 asks to calculate income and cross elasticities from given demand functions and explain the nature of the products. Question 4 contains 7 multiple choice questions about concepts like marginal utility, substitution effect, indifference curves, budget lines, and demand curves.

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Gajanan
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85 views2 pages

Q-Microeconomics Assignment 1 - HSS-01

This document contains a microeconomics assignment with 4 questions. Question 1 asks to calculate equilibrium quantity and price from given supply and demand curves, and consumer and producer surplus. Question 2 asks about the effect of taxes and subsidies on price and government surplus. Question 3 asks to calculate income and cross elasticities from given demand functions and explain the nature of the products. Question 4 contains 7 multiple choice questions about concepts like marginal utility, substitution effect, indifference curves, budget lines, and demand curves.

Uploaded by

Gajanan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Microeconomics Assignment 1

Total 10 Marks Time: 30 mins


Q1. Given Supply and Demand curves for a product (X) [Marks 2.5]

Demand: P = 12 - 0.25 Q
Supply: P = 6 + 0.75 Q
(a) Estimate the equilibrium Quantity and Price
(b) Estimate the Consumer Surplus and Producer Surplus (@ the estimated the
equilibrium Quantity and Price)
(c) Estimate the Total Economic Surplus (Consumer Surplus + Producer Surplus)

Q2. Answer the following Questions: [Marks 2: 1+1]

(a) When a government applies a tax (t) to (b) When a government applies a subsidy
a good, the price that consumers pay (s) to a good, the price that consumers
(Pd) is higher than the price that pay for the good (Pd) is lower than the
suppliers receive for the good (Ps) and price that suppliers receive for the good
then The total amount of tax the (Ps) and then The total amount of
Government will collect (Government’s subsidy the Government will have to pay
Surplus) is equal to the is equal to the
area:___________________________________ area:__________________________________

Q3. Estimate the elasticities and explain the nature of the Products. [Marks 2: 1+1]

(a) Suppose demand for cars in a city as a function of income is given by the
following equation:
Q = 20,000 + 5M
where Q is quantity demanded and M is Per capita income .
Find out income elasticity of demand when per capita annual income is Rs
15,000 and explain the nature of the Product.
(b) Suppose the following demand function for coffee in terms of price of tea is
given
Qc = 100 + 2.5Pt.
Find out the cross elasticity of demand when price of tea rises from Rs 50 per
250gm pack to Rs 55 per 250gm pack and explain the nature of the Product.
Q4. Multiple Choice Questions [0.5*7 = 3.5]
(You must justify your answer by explaining it in few suitable words)
(a) When total utility increases, marginal utility is (a) negative and increasing, (b)
negative and declining, (c) zero, or (d) positive and declining.
Ans. ________________

(b) If the MU of the last unit of X consumed is twice the MU of the last unit of Y
consumed, the consumer is in equilibrium only if (a) the price of X is twice the price
of Y, (b) the price of X is equal to the price of Y, (c) the price of X is one half of the
price of Y, or (d ) any of the above is possible.
Ans. ________________

(c) The substitution effect for a fall in the price of a commodity (ceteris paribus) is
given by (a) a movement up a given indifference curve, (b) a movement from a
higher to a lower indifference curve, (c) a movement down a given
indifference curve, or (d) any of the above.
Ans. ________________

(d) If the MRSxy for individual A exceeds the MRSxy for individual B, it is possible for
individual A to gain by giving up (a) X in exchange for more Y from B, (b) Y in
exchange for more X from B, (c) either X or Y, or (d ) we cannot say without
additional information.
Ans. __________________

(e) If an indifference curve were horizontal (assume X is measured along the horizontal
axis and Y along the vertical axis), this would mean that the consumer is saturated
with (a) commodity X only, (b) commodity Y only, (c) both commodity X and
commodity Y, or (d ) neither commodity X nor commodity Y.
Ans. __________________

(f) A consumer who is below the personal budget line (rather than on it) (a) is not
spending all personal income, (b) is spending all personal income, (c) may or may
not be spending all personal income, or (d) is in equilibrium.
Ans. __________________

(g) When real income rather than money income is kept constant in drawing a
consumer’s demand curve for a commodity, the demand curve is negatively sloped,
(a) Always, (b) never, (c) sometimes, or (d) often.
Ans. ___________________

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