Answer to Question #184642 in Microeconomics for Usama

Question

a) Price of the Tablet (P610 Samsung Galaxy Tab-S6 Lite Octa-Core 4GB Ram 64GB Storage 

10.1 Inch Wifi with S Pen) increases from PKR 57000 to PKR 66000. Due to this change in 

price

1. What will happen with the Quantity Demanded?

2. Draw a demand curve accordingly.

3. What will happen with the Quantity Supplied?

4. Draw a supply curve accordingly?

b) In response to the above price change if quantity demanded changes 40% and quantity 

supplied changes 20%

1. Find the elasticity of demand and explain this change.

2. Find the elasticity of supply and explain this change.

Answer 1

a) if price of the Tablet increases from PKR 57000 to PKR 66000, then:

1. The Quantity Demanded will decrease.

2. A demand curve is a downward-sloping curve through the points with prices PKR 57000 and PKR 66000.

3. The Quantity Supplied will increase.

4. A supply curve is an upward-sloping curve.

b) In response to the above price change if quantity demanded changes 40% and quantity supplied changes 20%, then:

1. The elasticity of demand is:

$Ed = -0.4/(66000/57000 - 1) = -2.53,$ so the demand is elastic.

2. The elasticity of supply is:

$Ed = 0.2/(66000/57000 - 1) = 1.27,$

so the supply is elastic too, but less elastic than the demand.