Question 1:

What is price elasticity of demand? Do you expect the price elasticity of demand for the following goods to be elastic or inelastic? Elaborate your answer.

a.Beef and Chicken

b.Haircare products available in the market.

c.Apple Inc. products.

d.Insulin for diabetes patients.

e.Use of electricity.

Question 2:

a.What is a budget line? What does it tell about the consumption possibilities of a consumer?

b.How does a consumer reach his most preferred combination of goods and services

Question 3:

Give suitable reasons or proofs of the following statements.

.

i.Distance between Average Total Cost Curve and Average Variable Cost curve reduces constantly.

ii.The total cost curve has a Y-intercept, however, the total variable cost curve does not have a Y-Intercept.

Question 4:

The demand and supply for chocolates can be given by following equations.

P=16-0.8Q(Demand)

P=2+0.5Q(Supply)

1.Calculate equilibrium price and quantity for this market.

2.If a tax of $4 is imposed on suppliers of this market how would the equilibrium price and output change? How much revenue would be earned by the Government?

3.Draw a diagram and mention the area of Consumer Surplus, Producer Surplus, Government Revenue, and Dead Weight loss after tax.

Question 5: Calculate the following

a.If a 12 percent rise in the price of orange juice decreases the quantity of orange juice demanded

by 22 percent and increases the quantity of apple juice demanded by 14 percent, calculate the

a. Price elasticity of demand for orange juice.

b. Cross elasticity of demand for apple juice with respect to the price of orange juice.

b.When Judy's income increased from $130 to $170 a week, she increased her demand for concert tickets by 15 percent and decreased her demand for bus rides by 10 percent. Calculate Judy's income elasticity of demand for

a. concert

b. bus rides.