Answer to Question #178428 in Microeconomics for hasnat

Question

Biryani and borhani are complements. Both have inclastic demand, A strike in dairy farming industry causes a decline in the production of yogurts. Use appropriately labeled diagrams to answer the following questions. (All diagrams must be explained properly)

a. How will this affect the price of yogurt?

b. What will happen to the price of a bottle of borhani? How will the expenditure on borhani change?

c. What happens to the price of biriyani? What happens to total expenditure on biriyani?

2. Using the diagram below calculate the change in revenue from equilibrium if price ceiling is set at $8.

Price $20

18

10

14

12

10

8

6

4

2

10 20 30 40 50 60 70 80 90 100 Quantity

3. Rice is a basic necessity good in Bangladesh. Using diagram explain if the government places a Tk.60 tax on consumers of rice, will the price paid by consumers rise by more than Tk.60. less than Tk.60, or exactly Tk.60?

Answer 1

$$solution$$

1]a. The equilibrium price of yogurt will increase as due to the decrease in supply the supply curve will move leftwards .

b]The price bottle of borhani will increase .The expenditure in borhani will decrease with increase in price as demand is effected .

c] The price of biriyan increases with increase in price of borhani. The total expenditure of biryani increases. as they are complimentary goods

2] $change\ in\ revenue=10-8=\$2$

3]

The price to be paid by the customers/ consumers of rice will rise by more than sixty in orders for producers to earn revenue as a result demand also will decrease since there is an effect of tax in place .