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The Case:

The Automobile industry has been an active and growing field in Pakistan.

There are many reasons which affect demand and supply of cars in

Pakistan. A few reasons are car financing facility, CNG, petrol prices and

law and order situation of the country. The decrease in the price of

petroleum products is current and acute reason to affect this industry. This

situation is creating problems for petroleum products producing countries

on one side and at the same time, providing relief and advantage to the

consumers. Suppose, quantity demanded and quantity supplied equations

for automobile industry is given below:

Qd = 97650 – 5P

Qs = 650 + 3P

Requirements:

Keeping in mind the above scenario, solve the following questions.

a. Find equilibrium price and equilibrium quantity for automobile

industry. Also show equilibrium condition graphically.

b. Find out the price elasticity of demand and price elasticity of supply

of automobile industry when it is in equilibrium and interpret the

results.

c. How would the decrease in petrol prices have affected the market

equilibrium of automobile industry? Illustrate graphically.

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Replies to This Discussion

?????

m ne solve kr le hai pr mere se diagram nhe bn rhe word p :( :(

share karoo ager bana li hy apny ,,,

 Salam bhai agar apne bana li hai to ap mujhe bc1004016932vu.edu.pk pe maile kren diagram bana k apko send kr dn ga bana to maine bhi li hai confirm krna hai meri thk bani hai k nahi

(A)

          Qd = 97650 – 5p

             Qs = 650 + 3p

 

     Where Qd = Qs

    By1         97650 – 5p = 650 + 3p

                           97000 = 8p

                                   P = 12125                 equilibrium price

                 Qd = 97650 – 5(12125)

                       = 97650 – 60625

                       = 37025

    By2          Qs = 650 + 3(12125)

                    Qs = 37025

       As          Qd = Qs

                37025 = 37025

Equilibrium condition on next P:

Table:

P

Qd¯

Qs­

90125

410125

33025

12125

37025

37025

15125

33025

41025

 

(B)

       Price elasticity of demand & price elasticity of supply

                         Ed = DQ / Dp ´ p / q

                               = -5 ´ 12125 / 37025

                          Ed = - 1.63740          less then unity

                          Es = DQ / Dp ´ p / q

                                = 3 ´ 12125 / 37025

                           Es = 0.98244           less then unity

(C)

        Price Decreases and its graphically representation:

Table:

Qd­

Qs¯

15125

33025

41025

12125

37025

37025

90125

410125

33025

 

paint me bna kr udhr past kr lo

like this

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ok thnku :)

sALAM...sis agr ap nay graph bnay hn to kindly share me

share kr diye hain graph.bna k post krna bhi

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