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During the Covid-19 pandemic, the Ayurvedic medicines have an inelastic demand and electronic devices have an elastic demand. Imagine that technological advancement doubles the supply of both products (i.e. quantity supplied at each price is twice as it was earlier)
i. What will be the equilibrium price and quantity in each market?
ii. Which product experiences a larger change in price and which product experiences larger change in quantity. (9)
b. Do you agree with this statement, MC curve crosses the ATC curve at its minimum?
Why? (4)
c. How does an increase in interest rate affects household savings? Explain with the help of an example with graph.
“Government should regulate mergers between firms” Give reason in favor and against this statement. (4.75)
b. Draw the diagram with demand and supply curves for an importing country. What is the consumer surplus and producer surplus before trade is allowed? What will be the consumer and producer surplus with free trade? Explain the change in total surplus.
Suppose government imposes $2 tax on each liter of petrol purchased and all petrol vehicle users require paying the same.
i. Draw a demand and supply diagram of the market for petrol without the tax. Show the price paid by consumers, price received by producers and the quantity of petrol sold. What is the difference between price paid by consumers and received by producers?
ii. Draw a demand and supply diagram of the market for the petrol with the tax. Show the price paid by consumers and received by producers and the quantity of petrol sold. What is the difference between the price paid by consumers and received by producers? Has the quantity of petrol sold increased or decreased? (6, 6)
b. What is the Deadweight loss of taxation? How does the deadweight loss change with the change in size of the tax? Give reasons.
Using supply and demand analysis explain the effect on the equilibrium price and quantity of
lamb meat in country X of each of the following events.
a) A fall in the price of chickens.
b) The introduction of a sales tax on all meat sold.
c) The imposition of a maximum price (or ceiling price) for lamb.
“If the Government wants to minimize the tax burden of any indirect tax
on consumers, then it is necessary that the Government impose this tax on
producers rather than consumers”. Is this statement True or False? Justify
and logically analyze your argument. Draw graphs if necessary.
derive elasticity of subtitution 𝑈(𝑥,𝑦)=[(1−𝛼)𝑥𝛾+(1−𝛽)𝑦𝛾]1/𝛾
QUESTION ONE
Mrs.Chausiku Mwendapole purchased share of ALI BABA for TZS 700 and received
a dividend per share of TZS 100 on 31st December 2020. Currently the share price is
worth TZS 800.
REQUIRED
Calculate the returns in TZS and percentage from the investment
The following are demand and supply functions
Qd=17-2P ;Qs=2+3P
Where Qd is quantity demanded,Qs is quantity supplied,and P is price.
I. Find the equilibrium price and quantity demanded and supplied.
II. Given another demand function: Qd=20-3P and also using the demand function in (i), find the market demand when price,P is GH¢2.00.
clearly distinguish between the concept of consumer surplus and producer surplus, use a graph to iilustrate your answer.
(Hint: clearly indicate the consumer surplus and producer surplus on the graph.)
The main participants in the economy are households and firms.
Discuss the important role that households play in an economy.
