Question 1

Differentiate between engineering efficiency and economic efficiency.

Question 2

A major snowfall in Sargodha has reduced the orange yield this winter. Show a graph to illustrate the
effect of this snow fall on the price and quantity in the orange market and also in the peach market
(assume that oranges and peaches are substitutes)

Question 3

(a) Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3 and cross
price elasticity of demand between it and good Y is -6. Determine how much the consumption of
good will change if the price of good X increases by 5 percent, the price of good Y increases by
10 percent and income falls by three percent
(b) Using two separate graphs to explain the effect of an increase in the price of cheese in the
supply of cheese and the supply of pizza

Question 4

Colgate sells its standard size toothpaste for Rs.25 having sales 8000 units per month. Recently its close
competitor English toothpaste reduced the price of its same standard size toothpaste from Rs.35 to
Rs.30. As a result Colgate sales declined by 1500 units per month. Calculate cross elasticity between the
two products and explain the relation between the two commodities.

Question 5

Complete the following table

Q TVC MC AVC TC ATC

0

1 90

2 135

3 80

4 400