# 3: (6 marks) The number of taxicabs in Motorville and the taxicab fares are regulated. The fare currently charged is Rs.500 a ride. Motorville taxicab drivers want to obtain government's permission to raise the fare to increase their revenues and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for taxicab rides: Price (Rupees per ride) Quantity demanded (rides per month) 300 160 400 120 500 80 600 40 700 0 (i) Calculate the price elasticity of demand for taxicab rides as the fare rises from Rs.500 to Rs.600. Is the demand price elastic or inelastic for this fare rise? (2 Marks) (ii) What happens to the taxicab drivers' total revenue if the fare rises from Rs.500 to Rs.600? How can you use your answers in part "a" to answer this question? Should the drivers try to obtain permission to raise the fare? (2 Marks) (iii) Calculate the price elasticity of demand for taxicab rides as the fare falls from Rs.500 to Rs.400. Is the demand price elastic or inelastic for this fare decrease? (2 Marks) Question # 4: (5 marks) Price per Ice-cream (Rs.) Demand for Ice cream (Qd) Supply for Ice cream (Qs) 140 500 1500 120 750 1200 100 1000 1000 80 1250 750 60 1500 600 40 1750 300 (i) Draw the market equilibrium for Ice cream. (2 Marks) (ii) Find out equilibrium price and quantity. (0.5 Marks) (iii) Is there surplus or shortage in the market at price Rs.40? At price Rs.120? (0.5 Marks) (iv) What is the maximum price that consumer is willing to pay for 1500 bottles? (1 Mark) (v) What is the minimum price that producer is willing to accept for 1500 bottles? (1 Ma