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# ECO401 Assignment No 1, Fall 2014,Solutions and Discussions Due Date: Nov-27, 2014

ECO401 Assignment No 1, Fall 2014,Solutions and Discussions Due Date: Nov-27, 2014

Important announcement,  Assignment # 01  ECONOMICS (ECO401)

Dear Students!

This is to inform that Assignment No. 1 will be opened on November 20, 2014 and due date of assignment submission will be November 27, 2014.

A 24 hours extra/grace period after the due date is usually available to overcome uploading difficulties which may be faced by the students on last date.  This extra time should only be used to meet the emergencies; and above mentioned due date should always be treated as final to avoid any inconvenience.

Assignment File will be attached Later !

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### Replies to This Discussion

wrong

Part B:

(a)    Find the elasticity of demand when price of airline’s tickets rises from \$150 to \$200 for business travelers and tourists.

ANS:

Percentage change in Quantity demanded (business) = (2800 – 2900)/2900 = -0.0345

Percentage change in Quantity demanded (tourist) = (1000 – 1800)/1800 = -0.44

Percentage change in Price = (200 – 150)/150 = 0.33

Elasticity of demand for business travelers:

PЄd = Percentage change in Quantity Demanded/Percentage change in Price

=  -0.0345

0.33

= -0.105

Elasticity of demand for tourist travelers:

PЄd = Percentage change in Quantity Demanded/Percentage change in Price

=  -0.44

0.33

= -1.33

(b) Discuss the variation in elasticity of demand results in part “a” for both types of travelers.

ANS:  Elasticity for business travelers is equal to -0.105; which shows that the demand              curve is inelastic.

Elasticity for tourist travelers is equal to -1.33; which shows that the demand curve          is elastic.

yes its ryt. but need more variation. like total revenue increase if pries increases in inelastic demand

if prices increase then total revenue decreased when demand is elastic etc...

a)  qs=qd

200+800p= 2000-400p

1200p = 1800

p= 1.5

b)

Price elasticity of demand = ∆qd/∆p * p/q

∆qd/∆p =  d(2000-400p)/dp

∆qd/∆p= -400

put in formula    PED = -400 *1.5/ 1400 = -0.42   ignore minum sign

same

price elasticity of supply =∆qs/∆p * p/q

∆qs/∆p= d(200+800p)/d(p)

= 800

put in fomula   =  800 *1.5/1400 = .85

c)   in my opinion   P of fuel rises   =   demand (-ve )   supply (+ve)

graph bnay ga kia is m ?

In my opinion

The increase in price of ticket will affect the demand of air ticket and demand will go down and price will go up. People will tend to use substitute ways to for travel. So supply will effected a bit. But a new demand curve will be plotted and can be shown with same supply curve. the intersection will be new equilibrium point.

tariq bhai .. surplus create hga/// new demand curve nhi bnani.. supply berh jaygi aur demand mai kami ajaygi.. jis ki wjah se demand and supply mai gap ajaega, us gape ki wjah se surplus create hjae ga....

Market Rule of Demand and Supply will never affect supply???

As Price increases, the supply also increases but demand will go down because there are other means of traveling are there as well....

So as i got it,

supply curve will move up and demand curve will move down...

Part A (b) me ye jo sub students table bna rahy hen ye kahan se aa gia ?

jaldi bna do brother because kal last date he submission ki

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