1.Explain the importance of the concept of cross elasticity of demand in a) formulating proper price strategy by a firm (b) in analyzing the degree of competition prevailing in an industry.

2.Explain the relationship between the total revenue of a firm and the price elasticity of demand for price reduction

3.Let the market supply and demand curves are given by the equations

P = 40 + 4Qs and P= 100 - 2Qd. What is the consumer and producer surplus at the equilibrium price and quantity?

4.1.QD=50 -2 P + 0.5 PR and Qs = -4 + P. Here PR if the price of a related good.

a.What is the equilibrium price and quantity if PR =Rs. 10?

b.Plot the demand and supply curve and show the equilibrium in the same plot.

==If govt. imposes tax on the related good by Rs.2 per unit, then how the equilibrium will change?

c.Do buyers of the commodity bear the whole burden of the excise duty?