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# ECO402 Assignment No 1 last date 12/05/16

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.

Views: 2645

### 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:

 P¯ Qd­ Qs¯ 15125 33025 41025 12125 37025 37025 90125 410125 33025

paint me bna kr udhr past kr lo

like this

like this

Attachments:

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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