# Microeconomics: Supply and Demand

MICROECONOMICS

Subject Two: Demand, Supply and Elasticity

1 . (a) Assume the demand and supply curves for good X are as follows: QD = 2 hundred - 5P QS = -25 & 4Pwhere L is in dollars per unit of Times.

(i)Sketch the necessity and supply figure.

(ii)What does " ceteris paribus" mean in relation to the demand shape above? (iii)In this example, what is the equilibrium price of Times, quantity supplied and demanded, total purchasers' expenditure about X and total income received by simply sellers?

(b) By a afterwards period it really is found the fact that supply function for X is: QS = -7 + 4P (i)What may be the new balance price and what quantities are traded in balance?

(ii)Does the fall in the equilibrium value, which follows this shift of the source curve, move the demand contour and hence boost the consumption of X?

2 . Assume the demand and supply curves once and for all Y happen to be as follows: QD =600 -- 7. 5P QS sama dengan -100 & 10Pwhere G is cost per kilogram measured in dollars and Q is quantity measured in вЂ000kgs

(a) Sketch the necessity and supply figure for good Y. (b) Determine the balance price and quantity. (c) If the selling price of a alternative good for Sumado a were to increase, outline the result that this might have on the require and supply curves you have drawn. What effect would it have on the equilibrium price and quantity?

(d) Imagine at the same time since (c) the cost of labour utilized to produce very good Y improved. Outline the combined impact that these may have on the demand and supply figure you have sketched. What impact would this kind of have around the equilibrium selling price and volume?

3. Presume the demand and provide curves once and for all Z happen to be as follows: QD = 15 - 1 . 5P QS = 0 + 1 . 0Pwhere S is the price per litre measured in dollars

and Q is definitely the quantity assessed in вЂ00litres

(a)Sketch the necessity and supply curves.

(b)Determine the equilibrium cost and amount.

(c)Explain this is of a consumer surplus, and calculate the worth at the equilibrium price.

(d)Explain the meaning of the producer surplus, and estimate the value with the equilibrium selling price.

4. Presume the number of bikes demanded and supplied in Victoria, in various rates, is as follows:

Price of BicycleQuantity DemandedQuantity Supplied

(\$) per year (вЂ000) per year (вЂ000)

|120 |24 |9 | |160 |20 |16 | |200 |17 |21 | |240 |15 |24

(a) Sketch the demand and supply curves. From the sketch determine the equilibrium price and quantity.

(b) Calculate the arc elasticity of require between the prices of \$160 and \$200, and interpret your solution. Is the demand for bicycles flexible or inelastic over this price range?

(c) Calculate the arc suppleness of supply between the two rates and interpret your response.

5. Describe precisely why it is not necessarily possible to estimate the magnitude of your own cost elasticity of demand, by just looking at the slope of the demand curve.

six. The local movie rental shop had been employing out DVDs at \$4 each. Usually, 1800 DVDs were appointed per week. In response to an increase in running costs, the store improved their DVD MOVIE hire to \$5, leading to the typical quantity of DVDs employed per week dropping to 1250.

(a)Calculate and interpret the arc own price elasticity of with regard to this store's DVD seek the services of.

(b)Explain how come the store's revenue by DVD renting has gone down despite increasing their value.

7. " Demand figure are always negatively sloped. вЂќ Discuss.

8. State if you would...

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