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# ECO402 Microeconomics Assignment No 01 Solution & Discussion Due Date: 23-05-2018

ECO402 Microeconomics Assignment No 01 Solution & Discussion Due Date: 23-05-2018

The Case:
Sugarcane is an important cash crop of Pakistan. It is mainly grown for
sugar and sugary production. It is an important source of income and
employment for the farming community of the country. During 2017-18, it
showed 7.45% growth in production and its production surpassed the
targeted production in 2017-18. Sugarcane production was 58,397
thousand tonnes in 2011-12 while its production became 81,102 thousand
tonnes during 2017-18. For the year 2017-2018, government has announced
the support price of sugarcane as Rs. 180 per 40 kg. Let the demand and
supply equations of sugarcane are given as follows:
Qs = 27 + 0.25P
Qd =75 - 0.15P

Requirement:
a) Find the market clearing level of quantity and price of sugarcane. Also
show equilibrium condition graphically.
b) Find out the price elasticity of demand and price elasticity of supply of
sugarcane at equilibrium price and quantity.
c) If the government wants to strictly implement the support price P = Rs.
180, then how much amount of shortage or surplus would occur?
Marks: (5+5+5)

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Qs = 27 + 0.25P

Qd =75 - 0.15P

Point A

Market clearing prince

27+0.25P=75-0.15P

0.25p+0.15P=75-25

0.40P=50

P=50/0.40= 125

Market clearing quantity

Qs=27+0.25(125)

=27+31.25

=56.25

Point B

Price elasticity of demand

Ed=P/Q* ΔQ/ΔP

125/56.25*(-0.15)

2.22*(-0.15) = -0.33

Price elasticity of Supply

Es=P/Q* ΔQ/ΔP

125/56.25*(0.25)

2.22*(0.25) =0.55

Point C

Qs = 27 + 0.25(180) =72

=72-56.25=15.75 surplus

market clearing price main 75 - 25 hi likhyn gay ?? kion k peechay 25 nahi , 27 hai.

27+0.25P=75-0.15P

ECO402 Assignment#01 Idea Solution

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Thanks a lot  Malik

Bhai is mein graph ka problem aa rhi hai kindly graph b upload kr dain

can you share its graphs ???

bhai is me equilibrium condition graphically kese bane gi ???

But yeh graphically kese show hoga ?

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