Phone : +92 302 4802033 E-mail : [email protected]
ECO_401 Assignment Solution
ECO_401 Assignment Solution

ECO_401 Assignment Solution

Solution:-

Q1.

Qd=Qs

5000-6P = 1500+P

5000-1500=P+6P

3500=7P

3500/7=7P/7

P=500

Putting the value of price in any of demand and supply equation

Q=5000 -6(500) or 1500+500

Q=2000

The equilibrium price is 500 and the equilibrium quantity is 2000

Q2.

 Qd = 5000-6P

dQ /dP= -6

The formula of elasticity = (dQ / dP) (P/Q)

= (500/2000)*(-6) =-1.5

Its absolute value (ignoring minus sign) is greater than one so it is point elastic

Q3.

Subsidies for producers increase supply and the quantity demanded by consumers. The government provides production subsidies whenever it is in the interest of the public in order to meet demand. As the producer increases supply, the cost of production is reduced, allowing the supplier to profit from both the subsidy and lower costs. As the result prices also decreases of

Cement products in domestic market.