Supply and Demand and Price

Topics: Supply and demand, Microeconomics, Economics Pages: 4 (739 words) Published: July 10, 2013
Assignment
Eco 101

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

$10500,000800,000
$15350,000730,000

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?

2)
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...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Microeconomics: Supply and Demand and Price Essay
  • Essay on Supply, Demand, and Price Elasticity Quiz
  • Supply and Demand and Price Elasticity Essay
  • Supply and Demand and Price Essay
  • Supply and Demand and Price Elasticity Essay
  • Supply and Demand and Price Elasticity Essay
  • Supply & Demand, and Price Elasticity Essay
  • Price Elasticity and Supply & Demand Essay

Become a StudyMode Member

Sign Up - It's Free