1. Suppose that demand function for a product is Qd = 200/P and the supply function isQs = 2P.

a) What is the equilibrium price and the amount bought and sold?

2. The demand function for Ice cream Qd ice cream = 9-P ice-cream + 4P popsicle - 0.25P ghee +8Pcone + 0.0001Y consumer income. The supply function is P -7.

Price of a popsicle is $1, a litre of ghee is $4, a cone is $0.50 and consumers average income is $40000

a) Calculate equilibrium price and quantity of ice-cream.

b) Calculate Elasticity of demand at equilibrium price.

c) At what price, total revenue be the highest?

d) Assume government imposed $1 tax on ice cream,

i) What would be the new equilibrium price & quantity?

ii) What would be the suppliers' revenue, government revenue and consumers' expenditure?

iii) Show the effect of $1 tax on market equilibrium.

3. If the Quantity demand is Q= 100P-1.

a) Draw the demand curve.

b) The above demand function will have constant Ed. Prove.

4. The demand for a product is Qd = A-BP, where P is the price and A and B are positive numbers. Suppose that when the price is $1, the amount demanded is 60 and the elasticity of demand is -1. What are the values of A and B?

Enrichment Activity

1. The XY government would like to help domestic automakers compete against foreign automakers in the light truck market.It can either impose a quota on the number of foreign trucks imported or by put an excise tax on each foreign truck sold in the X Y. The demand and supply schedules for imported trucks are given in the table below.

Market for imported trucks

Price Quantity demanded Quantity Supplied

$32,000 100,000 400,000

$31,000 200,000 350,000

$30,000 300,000 300,000

$29,000 400,000 250,000

$28,000 500,000 200,000

$27,000 600,000 150,000

a) In the absence of government interference, what is the price of an imported truck?

b) How many are sold in the XY?

c) Illustrate this situation with a diagram in the space next to the supply and demand schedule (you do not need to include numbers in your graph, just sketch supply, demand, label equilibria, etc.).

d) Suppose the government adopts a quota at 200,000 foreign trucks.What are the new market price and quantity for these trucks?

e) Show the effect of this in your diagram

f) Suppose that, instead of a quota, the government imposes an excise tax of $3,000 per truck.How many trucks will be purchased and at what price?

g) What price will the foreign automaker receive p