Economics (ECO401) Assignment No. 01 Qd=17000-6P Qs=900+8P a. Find the equilibri
ID: 1187737 • Letter: E
Question
Economics (ECO401)
Assignment No. 01
Qd=17000-6P
Qs=900+8P
a. Find the equilibrium price and equilibrium quantity for the sports goods industry in Pakistan. Also show the equilibrium condition graphically.
In equilibrium,
Qd=Qs
Therefore,
17000-6P=900+8P
17000-900=8P+6P
16100=14P
14P=16100
P=1150 Equilibrium price
putting the value of price in any demand and supply equation
Qd=17000-6P
Qd=17000-6(1150)
Qd=17000-6900
Qd=10100 Equilibrium demand
b. Find out the price elasticity of demand and price elasticity of supply of Sports goods when the industry is in equilibrium and interpret the results.
Solution:
price elasticity of demand=dQ/dPxP/Q
Q=17000-6P
dQ/dP=-6
dQ/dPxP/Q=-6x1150/10100
=-6900/10100
=0.6831 Ans.
price elasticity of supply=dQ/dPxP/Q
Qs=900+8P
dQ/dP=8
dQ/dPxP/Q=8x1150/10100
=9200/10100
=0.9108 Ans.
c. What will be the effect on the equilibrium situation of sports goods industry if cost of production of sports goods increases due to high per unit cost of elasticity. Illustrate graphically.
d. Suppose the Government takes initiatives to improve technology and provide better infrastructure what will be the imopact of these initiatives on equilibrium situation? Illustrate graphically.
plz give ma complete answer plz
Explanation / Answer
17,000-6P= 900+8P
14P= 16,100
P= 1,150
So Q= 900+8*1150= 10,100
Elasticity of demand -6 * 1,150/10,100= -0.683
Elasticity of supply 8* 1,150/10,100= 0.911
If cost of production increases the supply curve will shift to the left and up, raising the equilibrium price and decreasing the quantity.
If the government improves technology and infrastructure the supply curve will move down and to the right lowering the equilibrium price and increasing the quantity.
(I assume you can draw the graphs).
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