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Economics (ECO401) Assignment # 1 Solution required


Question:

Suppose the market demand and market supply for coffee is given by the

following equations:

Qd = 850 – 15P

Qs = 400 + 30P

A. Find quantity demanded and quantity supplied when the price of coffee is Rs. 8. Is there a surplus or shortage in the production of coffee? What should happen to the price of coffee?

B. Find the equilibrium price for coffee by using given demand and supply equations.

C. Prove that the price found in part (B) is an equilibrium price.

D. Show the equilibrium condition in coffee market graphically.

Marks: A = 6(4+1+1), B = 2, C = 3, D = 4

Calculate to the point where calculation is being required. NO need to write irrelevant material or extra interpretation.

Draw equilibrium condition in coffee market by yourself. Do NOT copy from any source. NO need to write irrelevant material.

Graphs are very important in Economics course. This assignment will enhance your skill of drawing graphs. A complete procedure of "How to draw graphs in MS-Word" is uploaded on announcement page of LMS. Get help from that uploaded file to solve part D of this assignment.

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Comment by Abdul Rauf on October 27, 2010 at 11:31am
Part A

Price = p = 8 Rs

Qd + 850 – 15P
Qd = 750

Qs = 400 + 30 p
Qs 640 Units

Part B
At equilibrium , Qd = Qs

B50 – 15p = 400 + 30P
45P = 450
P = ……………..

Part C …………………….

Part D ……… graph …………….

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