Question#4

Given below is the Supply Schedule of Nestle Milk per liter:

Price of Milk per liter (in Rs)100200300400

Quantity Supplied per day in liters (in 1000s)100200300400

A.Use the above data to illustrate the Supply Curve in a graph with complete labels.

B.Assume Rs. 200 is the original price of milk per liter and 200,000 liters is the original quantity of supply.

C.Suppose the price rises from Rs. 200 to Rs. 300, what will be the amount of Quantity Supplied?

D.Illustrate the impact of (C) on the graph.

E.Is this a movement along the supply curve or shift of the curve?

Question#4

A recent study determined the following elasticities for Volkswagen Beetles:

Price elasticity of demand = 2

Income elasticity of demand = 1.5

The supply of Beetles is elastic. Based on this information, are the following statements true or false? Explain your reasoning.

A.A 10% increase in the price of a Beetle will reduce the quantity demanded by 20%.

B.An increase in consumer income will increase the price and quantity of Beetles sold.