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ECO402 Microeconomics Assignment No 01 Solution & Discussion Due Date: 24 May 2021

ASSIGNMENT # 01
The Case:
Lemon is a popular fruit, which is used to add flavor to food. Lemons give flavor to baked goods, marinades, sauces, salad dressings, desserts, and drinks. It is also a good source of vitamin C. One 58-gram lemon can provide over 30 milligrams of vitamin C. In Pakistan, vegetable prices showed sharp increase during month of Ramazan. The demand of lemons has been increased in the month of Ramadan, which was responsible for the increase in price of lemons. Suppose the initial demand and supply equations of lemons are given as follows:
Qs = 260 + 0.40P
Qd =330 - 0.30P In the month of Ramadan, the supply equation of lemons remained as above while the demand equation of lemons became:
Qd =350 - 0.20P
Requirement:
a) Find the market clearing level of quantity and price of lemons before demand change.
b) Find the market clearing level of quantity and price of lemons after demand change.
c) Find out the price elasticity of demand of lemons at initial equilibrium price and quantity.
Marks: (3+3+4)

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a) Find the market clearing level of quantity and price of lemons before demand change.
b) Find the market clearing level of quantity and price of lemons after demand change.
c) Find out the price elasticity of demand of lemons at initial equilibrium price and quantity

AOA sir, any suggestions for subject assignment as submission date is coming soon.

a) solution:

formula Qd = Qs

Qd = 330 - 0.40P

Qs = 260 + 0.30P

Qd = Qs330 - 0.40P = 260 + 0.30P

330 -260     =  0.30P + 0.40P

70 = 0.70

Ptaking both side 0.70 

70 / 0.70 = 0.70/0.70P

100 = P

Put value
Qd = 330 - 0.30P
Qs = 260 + 0.40P

Qd = 330 - 0.30P
Qd = 330 -0.30 (100)
Qd = 330 - 30
Qd = 300

b)solution

Formula Qd = Qs
Qd = 350 - 0.20P
Qs = 260 + 0.40P
Qd = Qs
350 - 0.20P = 260 + 0.40P
350 - 260 = 0.40P + 0.20P
90 = 0.60P
Taking both side 0.60
90/0.60 = 0.60/0.60P
P = 150

Put value
Qd = 350 - 0.20P
Qs = 260 + 0.40P
Qd = 330 - 0.30P
Qd = 350 -0.20 (150)
Qd = 350 - 30
Qd = 320

c) solution
Formula: % Change in Price / % Change in Demand

% Change in Price
= 150 - 100 / 100 * 100
= 50%

% Change in Demand
= 320 - 300 / 300 * 100
= 6.66%

% Change in Price / % Change in Demand
= 50% / 6.66%
= 7.50%

kindly correct me if i m wrong for (C) solution

Ep      =        P/Q x Change Qd/ Change P

          Ep      =        100/300 (-0.30)

          Ep      =        -0.10            Inelastic

ECO402 Microeconomics Assignment No 01 Solution

Click on the below link to download the file

ECO402_Assignment%2301_Solution-Spring_2021-Complete-Solution.docx

#eco402 #eco402assignment #eco402assignmentsolution
ECO402 Assignment 1 Solution Spring 2021 || Microeconomics || 100% Correct Solution

 

ECO402

Assignment No 1 Solution

Spring 2021 Requirement 1:

The Case:

Lemon is a popular fruit, which is used to add flavor to food. Lemons give flavor to baked goods, marinades, sauces, salad dressings, desserts, and drinks. It is also a good source of vitamin C. One 58-gram lemon can provide over 30 milligrams of vitamin C. In Pakistan, vegetable prices showed sharp increase during month of Ramazan. The demand of lemons has been increased in the month of Ramadan, which was responsible for the increase in price of lemons. Suppose the initial demand and supply equations of lemons are given as follows:

Qs = 260 + 0.40P

Qd =330 - 0.30P

In the month of Ramadan, the supply equation of lemons remained as above while the demand equation of lemons became:

Qd =350 - 0.20P

Requirement:

  1. a) Find the market clearing level of quantity and price of lemons before demand change?

Solution:

 

 

 

 

 

70= 0.70P

70/0.70=0.70/0.70P

P=100

Put value:

 

 

 

 

= 30

  1. b) Find the market clearing level of quantity and price of lemons after demand change?

Solution:

 

 

 

 

 

90=0.60P

90/0.60=0.60/0.60P

P=150

Put value:

 

 

 

 

= 320

  1. c) Find out the price elasticity of demand of lemons at initial equilibrium price and quantity?

Solution:

Formula: %Change in Price / %Change in Demand

%Change Price

=150-100/100*100

=50%

%Change Quantity

=320-300 /300*100

=6.66%

%Change in Price / %Change in Demand

=50% / 6.66%

 

 

 

 

ECO402 Assignment 1 Solution Spring 2021

Requirement 1

Find the market clearing level of quantity and price of lemons before demand change

Solution

 

Qs = 260 + 0.40 Qd = 330 -0.30P

Qd=Qs

 

 

So, 330 – 0.30P = 260 + 0.40P 0.40P + 0.30P = 330 – 260

.7P = 70

P = 70/.7 = 100 Q = 330 – 0.30P

Q = 330 – 0.30*100 Q = 330 – 30

Q = 270

Requirement 2

Find the market clearing level of quantity and price of quantity and price of lemons after demand change.

Solution

Qs = 260 + 0.40 Qd = 330 - 0.20P

where Qd=Qs

So, 260 + 0.40P = 350 + 0.20P 0.40P + 0.20P = 530 – 260

.6P = 90

P = 90/.6 = 150

 

 

Q = 350 – 0.20P Q = 350 - .20(150)

Q = 350 – 30

Q = 320

Requirement 3

Find out the price elasticity of demand of lemons at initial equilibrium price and quantity.

Solution

 

Formula

Percentage change in Quantity Demanded / Percentage change in Price

Calculation

50 / 50 * 100 = 1

 

 

 

THE END

 

 

 

ECO402 Microeconomics Assignment No 01 Solution

Click on the below link to download the file

ECO402_Assignment%2301_Solution-Spring_2021-Complete-Solution.docx

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