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Demand Question Tutorial

The document contains tutorial questions focused on demand functions for various commodities, including calculations for demand schedules, elasticity, and shifts in demand due to changes in income or prices. It also explores the effects of taxes on supply and demand equilibrium, as well as the relationship between different goods. Additionally, it includes specific scenarios involving demand for commodities like maize flour and VODACOM services, requiring algebraic solutions and economic interpretations.

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obedygeorge2003
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5 views2 pages

Demand Question Tutorial

The document contains tutorial questions focused on demand functions for various commodities, including calculations for demand schedules, elasticity, and shifts in demand due to changes in income or prices. It also explores the effects of taxes on supply and demand equilibrium, as well as the relationship between different goods. Additionally, it includes specific scenarios involving demand for commodities like maize flour and VODACOM services, requiring algebraic solutions and economic interpretations.

Uploaded by

obedygeorge2003
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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TUTORIAL QUEASTIONS ON DEMAND

1. Suppose that the following demand function for commodity X has been estimated by an
econometrician at the suburb of Dar es salaam city:
Qx = 3,848 - 2Px + 0.004Y + 3Py; where Qx is the quantity of commodity X, P x is the price
of commodity X, Y is the income, and Py is the price of related commodity.

(a) Develop a demand schedule for commodity X over the price range P x = T.Shs 800 to
Px = T.Shs 400; if Y= T.Shs 12,000 and P y = T.Shs 600. (Hint: Use T.Shs 100 change
in Px over the range.
(b) Assuming that the values of Y and Py are held constant, write an equation for the
demand curve for commodity X
(c)Explain how the demand curve would shift if the level of income increases
(d)Discuss the relationship between commodity X and commodity Y.

2. Suppose that the demand function for maize flour is given by Q=500-50P where Q is the
Kilograms of maize flours demanded per week and P is the price in Tanzanian Shillings.
(a) How many Kilograms of maize flour are demanded at a price of 2? Price of 3?
Price of 5?
(b) Assume that during the month of December, demand function shifts to Q=1,000-
50P. Repeat part (a) for this new demand function.

3. The demand for a good is given as: Q = 120 – 2P + 2Y + 0.4A, Where Q, P, Y and A
denote quantity demanded, price, and income and advertisement expenditure respectively.
(a) Calculate demand when P = 10, Y = 20 and A = 5.
(b) Assuming that price and income are fixed, calculate the
increase in advertising expenditure required to raise demand to 150 units.
(c) Does the demand for this good increase or decrease with the higher
income? Explain with example
4.. Outline the market determinants for the commodity.

5.Suppose that the demand curve for new cars is described by the following equation
Qd=50,000-P
d
Where Q is the number of new cars per years and P is the average price of cars in shillings.

(a) What is quantity of cars demanded when the average price of a car is 10,000? 15,000?
25,000?
(b) Sketch the demand curve for cars. Does this demand curve obey the law of demand?
Explain
5.Given the following demand function for good X Qx= 20- 5Px Where Qx is the quantity
demanded for good X and Px is the price of good X. Calculate price elasticity of demand when
price is 3 units and comment on your result.

6. Maria income was TSHS 50 when her quantity demand for good X and good Z were 15 units
and 35 units respectively. When her income increased to TSHS. 80 her quantity demand for good
X increased to 20 units while that of good Z decreased to 25. Find the income elasticity of
demand for good X and good Z and comment on your answer.

7. After a carefully statistical analysis, VODACOM, conducted that the demand function for
their service in Tanzania is QDD= 500 -0.3P + 2Pr + 0.1Y, where QDD is the quantity
demanded for VODACOM service , P is the longa price of VODACOM, Pr is the price of rival
and Y is the per capital disposable income of consumers, at present, P = 100 inits, Pr = 200 units
and Y= 50,000 units
(a) What is price elasticity of demand for VODACOM?
(b) What is income elasticity of demand?
What is cross elasticity of demand between VODACOM and its rivals?

8. Suppose that the supply function is given by: P = 10Q + 100. The demand function is given
by: P = 500 - 30Q.
(a) Find the equilibrium price and quantity algebraically
(b) If the government imposes a fixed tax of T.Shs.80.00 on each unit of a good, show how the
supply curve is affected algebraically.
(c) Find the equilibrium price and quantity following the imposition of the tax.
(d)Find the government tax revenue.
(e) Compare prices paid by the consumer before and after the imposition of the tax, determine
the proportion of the T.Shs.80.00 per unit tax that is paid by the consumers.

9. Suppose the market demand and supply for cigarette in Dares salaam are respectively
4 1
P=200− Qd P=50+ Qs
represented by the equations: 5 And 5
(a) Find the equilibrium price and quantity.
Suppose that the city of Dar es salaam wants to reduce smoking and therefore decides to
impose a T. Shs 10/pack excise tax on producers.
(b) Given the tax, what is the market-clearing price and quantity?
(c) How much of the tax revenue is paid by consumers?
(d) How much of the tax revenue is paid by sellers?
(e) What are government tax revenues?
10. ( a) The market demand function of a commodity is represented by
Qx = 20-2Px -0.5Py + 0.01M; where Qx is quantity demanded for commodity X, Px is
the price of commodity X, Py is the price of commodity Y and M is the consumer's income.
Calculate price and cross elasticities of demand for commodity X when Px =5, Py=10 and M
=1000.
( b) Calculate the elasticity of supply for the supply curve P=10+3Q when P=25 and Q=5

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