1. a) Briefly explain the factors that determine the price elasticities of demand and supply. b) The accompanying table presents the prices and associated demand quantities of ready-made garments of Bangladesh at different world incomes.
Price of RMG Quantity demanded when Quantity demanded when world GDP is $ 65 trillion world GDP is $ 70 trillion
i) Using the midpoint method, calculate the price elasticity of demand when the price increases from $10 to $15 and the world GDP is $ 65 trillion. Is supply elastic, inelastic or unit elastic?
ii) Using the midpoint method, calculate the income elasticity of demand when the world GDP increases from $ 65 trillion to $ 70 trillion and the price of RMG is $15. Is the good normal or inferior?
a) Graphically describe the effect of price ceiling and price floor set by the government.
b) The demand for MS-word software is very inelastic whereas the supply is relatively elastic. If an excise tax, T, is imposed on purchase, who is going to bear most of the burden - consumer or producer? Explain your answer with a diagram. (4)
3) Consider a perfectly competitive firm in the market for bottled milk. The following table presents information on price, quantity sold, and total costs for this firm:
|Quantity (in gallons) |Total Cost (in dollars) | |0 |3 | |1 |5 | |2 |8 | |3 |12 | |4 |17 | |5...
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