1. 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.
1. 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
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
(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
Elasticity of Supply (PES) of a good.
2. (a) Explain the concepts of Price Elasticity of Demand (PED), Income
Elasticity of Demand (YED) and Cross Elasticity of Demand (CED)
(b) To what extent can PED be important to:-
(i) a government, (ii) managers of hypermarkets ‘
3. (a) Compare the equilibrium of a firm under
monopolist in the Long-Run
(b) “
often of dubious quality: consumers are victims.”.How far do you agree with this
statement?
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