UNIVERSITY OF MODERN SCIENCES College of Business SUMMER-II 2014-15 Assignment BIE-ECON 301 Course Name: Business and Industrial Economics Course Code: ECON 301 Assessment: ASSIGNMENT BIE- ECON 301 Submission Date: August 29, 2015 Student Name: Student ID: ----------------------------------------------------------------- ----------------------------Section { Total Marks: 50 Weightage: 20% } Course Learning Outcomes (CLOs) Coverage: CLOs K1 K2 C1 Max Marks 15 15 10 Awarded INSTRUCTIONS TO THE CANDIDATES: This is individual assessment. Group work is not allowed. In mentioned cases provide a neat diagram to explain your answer. Make sure to label axes properly. Else points will be deducted PLEASE SUBMIT the Assignment through STUDENT PORTAL Assignments submitted through Student Portal will be marked ONLY The Assignments submitted after DUE DATE will not be ENTERTAINED Question-1: Suppose that you have been hired as an Economic Researcher by OPEC and given the following schedule showing the world demand and supply for oil: (5 marks) Page | 1 Quantity Demanded Quantity Supplied (QS) Price (P) (Qd) (millions of barrels/day) ($/barrel) 10 20 30 40 50 (millions of barrels/day) 60 50 40 30 20 20 30 40 50 60 Answer the following questions: a. At what price, the oil market will be in equilibrium situation? b. If OPEC produces 50 million of barrels/day, calculate its Total Revenue (TR)? c. If the price of oil rises from $40 to $50 per barrel, what will be the Total Revenue (TR) from oil sales? Also mention either TR will increase or decrease? d. When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Demand (Ed)? e. When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Supply (Es)? Question-2: Define the Law of Supply? Keeping in view the Law of Supply, how the following factors will shift the supply curve? (Each answer must be supported by a neat diagram): (2 + 8 = 10 marks) a. b. c. d. If If If If costs of raw material increases in the plastics industry; new technology is introduced in the automobile manufacturing; OPEC decides to reduce oil prices in the Gulf Region; government introduces some new taxes in the construction sector. Question-3: Define and explain 'Law of Diminishing Returns with the help of diagram. What are the different stages of production in the short run? (5+5 =10 marks) Page | 2 Question-4: Define and explain 'Price Discrimination (PD)' with the help of diagram. Also give examples of Price Discrimination from the real world? (5+5 = 10 marks) Question-5: (2+2+2+2+2+2+3 = 15 marks) Suppose the quantity demanded of good (Qd) depends only on the price of the good (P), monthly income (M), and the price of a related good R (PR): Qd 180 10P 0.2 M 10PR a. Construct the demand curve for the good when M = $1,000 and PR = $5. The equation for demand is Qd = ________________________ b. Interpret the intercept and slope parameters for the demand equation in part a. c. Let income decrease to $950. Construct the new demand curve. This good is _____________________ (normal, inferior). Explain using your graph. d. For the demand curve in part c, find the inverse demand function: P = _____________________. e. Let the price of good R increase to $6 (income remaining at $950). Construct the new demand curve. Good R is a _______________________ (substitute, complement) good. Explain using your graph. f. For the demand curve in part e, find the equilibrium price and quantity when supply function is as under; Qs 10 10P. PE = ____________ and QE = ____________ g. Construct the supply curve and verify your answer by showing equilibrium price and equilibrium quantity graphically. Good Luck! Page | 3