1. (a) The weekly demand (Qd) and supply (Qs) functions for a good X are given by:- Qd = 1000 – 5p Qs = -400 + 15p, where P = Price per unit (R) (i) Draw the demand and supply curves on a graph and find the equilibrium price and quantity (ii) If the demand function changes to 1200 – 5P, show the changes to part (i) above. (iii) Suppose a subsidy of R40 per unit is subsequently granted to producers of good X. Determine the new equilibrium price and quantity. (b) Use suitable examples to explain the likely effects of a price ceiling. (c) What do you understand by the ‘Substitution and Income effects’ of a change in price of a good. (d) Elaborate on the factors influencing Price Elasticity of Demand (PED) and Price Elasticity of Supply (PES) of a good.

1. (a) The weekly demand (Qd) and supply (Qs) functions for a good X are given by:- Qd = 1000 – 5p Qs = -400 + 15p, where P = Price per unit (R) (i) Draw the demand and supply curves on a graph and find the equilibrium price and quantity (ii) If the demand function changes to 1200 – 5P, show the changes to part (i) above. (iii) Suppose a subsidy of R40 per unit is subsequently granted to producers of good X. Determine the new equilibrium price and quantity. (b) Use suitable examples to explain the likely effects of a price ceiling. (c) What do you understand by the ‘Substitution and Income effects’ of a change in price of a good. (d) Elaborate on the factors influencing Price Elasticity of Demand (PED) and Price Elasticity of Supply (PES) of a good.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7A: Production Economics Of Renewable And Exhaustible Natural Resources, Advanced Material

Section: Chapter Questions

Problem 1E

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