1. Explain with the help of a neat labelled diagram, what happens to equilibrium price andquantity in the following situations:a. A big increase in demand is followed by a smaller increase in supply.b. A decrease in demand is followed by an equal decrease in supply.2. When the price of "X" changes from OMR 10 to OMR 15, the demand for "Y changesfrom 15525 kgs to 18725 kgs. Calculate cross elasticity of demand for these goods. Whatkind of products are “X" and "Y"?marks)(23. Assume that in the short run a firm is producing 200 units of output, has average totalcosts of OMR350, and average variable costs of OMR200. Calculate Fixed costs. Definefixed costs. (2 marks) 4. Ahmed has an income of OMR150 per month that has to be spent on two goods: Shoes and Jeans. From the following table, estimate the bundle that maximizesAhmed's well-being.Quantity (units)Shoes (OMR20/pair)Marginal Benefits(OMR)Jeans (OMR10/pair)Marginal Benefits(OMR)14035233333282242315520106157.5(4 marks)5. The total cost of a firm is OMR 200, the average variable cost is OMR 16, and theaverage fixed cost is OMR 24. How may units of the output does the firm produce?mark)(16. When the price of milk increases from OMR 1.500 to OMR 3.500, its quantity demandedfalls from 3500 litres to 2000 litres. Find the elasticity of demand . comment on thedegree of elasticity.(2 marks)7. A firm produces 10 units of output, its total costs are OMR 2250 and average fixed costsare OMR 125, then find total variable costs. (2 marks)

"Since you have asked multiple questions, we will solve the first one for you. If you want any…

Explain with the help of a neat labelled diagram, what happens to equilibrium price and quantity in the following situations: a. A big increase in demand is followed by a smaller increase in supply. b. A decrease in demand is followed by an equal decrease in supply.

Explain with the help of a neat labelled diagram, what happens to equilibrium price and quantity in the following situations: a. A big increase in demand is followed by a smaller increase in supply. b. A decrease in demand is followed by an equal decrease in supply.

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter4: The Market Forces Of Supply And Demand

Section: Chapter Questions

Problem 6CQQ

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Question

1. Explain with the help of a neat labelled diagram, what happens to equilibrium price and
quantity in the following situations:
a. A big increase in demand is followed by a smaller increase in supply.
b. A decrease in demand is followed by an equal decrease in supply.
2. When the price of "X" changes from OMR 10 to OMR 15, the demand for "Y changes
from 15525 kgs to 18725 kgs. Calculate cross elasticity of demand for these goods. What
kind of products are “X" and "Y"?
marks)
(2
3. Assume that in the short run a firm is producing 200 units of output, has average total
costs of OMR350, and average variable costs of OMR200. Calculate Fixed costs. Define
fixed costs. (2 marks)

4. Ahmed has an income of OMR150 per month that has to be spent on two goods: S
hoes and Jeans. From the following table, estimate the bundle that maximizes
Ahmed's well-being.
Quantity (units)
Shoes (OMR
20/pair)
Marginal Benefits
(OMR)
Jeans (OMR
10/pair)
Marginal Benefits
(OMR)
1
40
35
2
33
33
3
28
22
4
23
15
5
20
10
6
15
7.5
(4 marks)
5. The total cost of a firm is OMR 200, the average variable cost is OMR 16, and the
average fixed cost is OMR 24. How may units of the output does the firm produce?
mark)
(1
6. When the price of milk increases from OMR 1.500 to OMR 3.500, its quantity demanded
falls from 3500 litres to 2000 litres. Find the elasticity of demand . comment on the
degree of elasticity.(2 marks)
7. A firm produces 10 units of output, its total costs are OMR 2250 and average fixed costs
are OMR 125, then find total variable costs. (2 marks)

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