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Economics Assignment 1

This document provides an economics assignment that includes analysis of demand and supply curves. It examines how different factors affect the demand, supply, and equilibrium price and quantity. Specifically: 1) It defines different goods as normal, inferior, and derives demand curves based on given prices and income levels. 2) It calculates the equilibrium price and quantity before and after imposing a tax. The tax increases the price and decreases the quantity demanded. 3) It analyzes the price elasticity of demand and factors that affect the elasticity of supply. Imposition of a price floor above the equilibrium price would lead to surplus.

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stephen nimo
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58 views5 pages

Economics Assignment 1

This document provides an economics assignment that includes analysis of demand and supply curves. It examines how different factors affect the demand, supply, and equilibrium price and quantity. Specifically: 1) It defines different goods as normal, inferior, and derives demand curves based on given prices and income levels. 2) It calculates the equilibrium price and quantity before and after imposing a tax. The tax increases the price and decreases the quantity demanded. 3) It analyzes the price elasticity of demand and factors that affect the elasticity of supply. Imposition of a price floor above the equilibrium price would lead to surplus.

Uploaded by

stephen nimo
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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ECONOMICS ASSIGNMENT 1

ID: 10109773

A)PZ is Normal goods

B)M is inferior goods

C)Py is inferior good

Given that Py = 2, Pz =10, M=5

D) Qxd = 3/4 – 1/3(Px) – 5Py + 2Pz – 2/10M

Qxd = 0.75 – 0.33Px – 5(2) + 2(10) – 0.2(5)

= 0.75 – 0.33Px – 10 + 20 – 1

= 9.75 – 0,33Px

E) Demand curve , when price =0,quantity is 9.75 and where quantity is 0 price is 29.54

29.5

Qd=9.75-0.33p

0 9.75 Q

F) quantity if price=3 this implies

Qd=9.75 -0.33(3) = 8.76

G)supply function
Qs= -4 + 0.5Px +7n-6t + 4i

G) Qs= -4 + 0.5P +7(1) -6(3) + 4(4)

= 1 + 0.5P.

H) if price = 10 it implies

= 1 + 0.5(10) =6

Therefore quantity supply is 6

I)supply curve

Price

supply

10

0 6 Quantity

J) Equilibrium price and quantity .Qd=Qs

Qd = 9.75 - 0.33P,Qs = 1+ 0.5P

= 9.75 – 0.33P = 1 +0.5P

8.75 0.83 P
= 8.75 =0.83P = = = 10.54
0.83 0.83

Therefore equilibrium price is 10.54

If price is 10.54 then equilibrium quantity implies

= Qd= 9.75 –0.33(10.54)=6.29

K) suppose a tax of GHC 4.00

New supply function will be Qs= 1+0.5(p-4)


= Qs =1+0.5P-2= -1 + 0.5P

L) after tax supply function

Price

supply

10

5 6 Quantity

M) 2 factors that affects supply

i) cost of production

ii)Technology

N) equilibrium price an quantity after tax implies

Demand= Qd=9.75-0.33P, supply implies Qs= -1+0.5P

9.75 -0.33P = -1+ 0.5P = 10.75=0.83P

10.75 0.83 P
= =12.95 which implies equilibrium Price = 12.95
0.83 0.83

Equilibrium quantity is therefore Qs=-1 + 0.5(12.95)

Equilibrium quantity = 5.48

O) after the imposition of the tax prices increases and quantity demanded decreases, demand is elastic
to price.

∆ Q P 1+ P 2 −0.13
P) midpoint x = =-0.76
∆ P Q1+Q 2 0.76

Q) inelastic

S) 2 factors that affect elasticity of supply

i)The number of producers

ii) length of production period.


Imposition of price control of GHC 18.00

T) Equilibrium price and quantity in J

Price D SURPLUS S

18

10.5 E

0 5 6.29 7 QUANTITY

U) price floor

V)with this type of price control since prices are are producers will producers but consumers will be
unwilling to purchase which will leads to surplus

Z) Distinguish between consumer surplus producer surplus

T he consumer surplus is the difference between the highest price a consumer is willing to pay


and the actual market price of the good. The producer surplus is the difference between the
market price and the lowest price a producer would be willing to accept. ... The two together
create an economic surplus.

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