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Assignment 2

Microeconomics Assignment 2

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Hải Linh Nguyễn
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4 views

Assignment 2

Microeconomics Assignment 2

Uploaded by

Hải Linh Nguyễn
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MICROECONOMICS: ASSIGNMENT 2

EXERCISE 1:
Price ($/unit) 100 120 140 160 180 200
Quantity Demanded 1000 900 800 700 600 500
Quantity supply 300 400 500 600 700 800
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150
Price($/unit)

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50

0
200 300 400 500 600 700 800 900 1000 1100

Quantity demanded Quantity supply

1. What are the demand and supply equations, equilibrium price and equilibrium quantity for
fridge?
 Demand equation: P = a - bQd
- Intercept: Qd = 0  a = 300
∆P 20
- b= = = 0.2
∆ Q d 100
 P = 300 – 0.2Qd (Qd = 1500 – 5P)
 Supply equation: P = c + dQs
- Intercept: Qs = 0  c = 40
∆P 20
- d= = = 0.2
∆ Qs 100
 P = 40 + 0.2Qs (Qs = 5P – 200)
 Equilibrium price for fridge: Qd = Qs
 1500 – 5P = 5P – 200
 10P = 1700
 P = 170
 Equilibrium quantity for fridge: QE = Qs = Qd
- Equilibrium price: P = 170
 QE = 5x170 – 200 = 650
Conclusion: QE = 650 (units); PE = 170$
2. What are the surplus and shortage of fridge at the price of $ 200 and $
110 ?
- At the price of $200, Qd = 500 and Qs = 800 (Qd < Qs)
 The surplus of fridge at the price of $200 is: ∆ Q=800−500=300(units )
-
At the price of $110, Qd = 1500 – 5x110 = 950 (units) and Q s = 5x110 – 200 = 350
(units) (Qd > Qs)
 The shortage of fridge at the price of $110 is: ∆ Q=950−350=600 (units)
3. Suppose the supply of fridge is constant, what happened for demand for fridge if price of
electricity increase? Given that quantity demanded for fridge change 300 units at each price
level, what are new equilibrium price and new equilibrium quantity for fridge?
 If price of electricity increases in case that the supply of fridge is constant, the demand
for fridge will decrease.
Reason: The increasing in the price of electricity leads to the increasing of fridge. According to
the law of demand, the quantity demanded will decrease if the price rises. Therefore, the
demand curve will shift to the left side.

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Price($/unit)

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Quantity demanded Quantity supply


Quantity demanded (-300) Quantity demanded (+300)
 Given that quantity demanded for fridge decreases 300 units at each price level.
- New demand equation: P = a - bQd’
∆P 20
+b= = = 0.2
∆ Qd 100
+ When P = 200; Qd’= 200  200 = a – 0.2x200  a = 240
 Qd’ = 1200 – 5P
- New equilibrium price: Qd’ = Qs
 1200 – 5P = 5P – 200
 10P = 1400
 PE = 140
- New equilibrium quantity: QE = Qd’ = Qs = 1200 – 5x140 = 500
Conclusion: PE = 140$; QE = 500 units
 Given that quantity demanded for fridge increases 300 units at each price level.
- Equilibrium price: PE = 200$
- Equilibrium quantity: QE = 800 units
4. Suppose government imposes a tax of $10 per one units of fridge sold, what are new
equilibrium price and new equilibrium quantity for fridge?
Government imposes a tax of $10 per one units of fridge sold, it means that the price will
increase per one units.
- P = 40 + 0.2Qs1
- The new equation: P = 50 + 0.2Qs1  Qs1 = 5P -250
- Demand is constant  Equilibrium price: Qd = Qs1  PE = 175$  QE = 625 (units)
5. Suppose government supports for the sellers the amount of $10 per one units of fridge sold,
what are the new equilibrium price and new equilibrium quantity for fridge?
- The new equation: P = 30 + 0.2Qs2
- Demand is constant  Equilibrium price: Qd = Qs1  PE = 165$  QE = 675 (units)

EXERCISE 2: With the aid of diagrams, show how each of the following events affects the supply and/
or demand curve for motorcycles. In each case, show and state the effect on the equilibrium price
and quantity.
 An increase in Vietnamese personal income tax rates
The demand curve for motorcycles will shift to the left side. Because of the increasing
in Vietnamese personal income tax rates, the demand of motorcycles will decrease.
(Non – price factor)
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Demand curve Supply curve New demand curve

 An increase in the price of steel


The supply curve will shift to the left. When the price of steel (price of input) increase,
the quantity of supply decrease.
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 An improvement in
technology in 100
motor vehicle
production at the 50
same time as
recession hits the 0
Vietnamese 0 200 400 600 800 1000 1200

economy. Demand curve Supply curve New supply curve


- An
improvement in technology in motor vehicle production makes the supply quantity
increase, so the price will fall. However, because of the economic recession, the
demand decreases and the price also fall. So, the supply curve will shift to the right
and the demand curve will shift to the left.
Cung tăng  Cầu giảm
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Demand curve Supply curve


New demand curve New supply curve
Cầu giảm  Giá giảm

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