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The textile industry in Pakistan is growing over the time due to the modernization, high standards of living and increasing demand for good material at reasonable price. Many fabric brands like as Gul Ahmed, Sana Safinaz, Warda, Nadia Hussain, Firdous Lawn, Bareeze Lawn, Khaadi, Kayseria, Nishat and many others jointly make the textile industry in Pakistan. As there are more than 50 top fabric brands in Pakistan which are concerned with design, production and distribution of yarn, cloth and clothing but in the face of this high competition, Khaadi is efficacious enough to capture the enormous market share and profit. It has specialized in hand-woven products and other textiles. It has 45 branches working across Pakistan. Estimated annual revenue of Khaadi is 100 Million $.

Being a student of economics, you’re required to identify the market structure category in which this Khaadi brand falls. Justify your answer by applying any two key characteristics of that market structure on the given industry.

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ECO402 GDB Solution 2019

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Impact of health Tax

On Producer Side

When the government imposes tax on output of a firm it increases firm's marginal cost by the amount of the tax. In return the firm will reduce output to the point at which the marginal cost plus the tax equals. Sales tax shifts supply curve inward.

When the Govt. implemented the health tax the output of the firm reduced to maintain as there is an effect on demand side that the output level is reduced from 01 to Q2

On Consumer Side

When the govt increases or implements the tax on goods, these taxes influence the consumer behavior. The immediate effect is the price level of the goods increased so the demand for

goods reduced because it reduces the buying power of the consumer so consumer buy less p with these prices.

ECO402 GDB 1 IDEA SOLUTION SPRING 2019

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