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Virtual University of Pakistan Assignment # 1 (Eco401) : A. Calculate The Market Equilibrium Level of Price and Quantity
Virtual University of Pakistan Assignment # 1 (Eco401) : A. Calculate The Market Equilibrium Level of Price and Quantity
ASSIGNMENT # 1 (ECO401)
PROGRAM: BS PSYCHOLOGY
Question:
Qd = 1900 - 60P Qs = 300 + 20P
Where ‘P’ is the price in rupees of a packet of Surf excel and ‘Qd’ is quantity demanded of a packet of a
Surf excel. ‘Qs’ is quantity supplied of a packet of Surf excel.
Requirements:
Solution (Part A)
Given:
Qd=900-60P
Qs=300=20P
In Equilibrium
Qd=Qs
1900-60P=300+20P
1900-300=20P+60P
1600=80P
1600 =P
80
20=P
OR
P=20Rs
So, P=20
Qd=1900-60(20)
=1900-1200
=700
b. Calculate price elasticity of supply using point elasticity method when dMart is in
equilibrium and interpret the result.
Solution (Part B)
Here Qs=300+20P
d (Q) = d (300+20P)
Dp Dp
dQ = d (300) + d (20P)
Dp Dp Dp
=
0+
dQ 20
Dp
=20…….
dQ (i)
Dp
E= dQ x P
Dp Q
E= 400
700
E=0.571
4
Therefor
e,
Point elasticity of supply is E=0.5714 & it is inelastic point because E is lessthan 1 .
c) What will happen to supply, equilibrium price and equilibrium quantity of a packet of
Surf excel if dMart improves technology?
Solution (Part C)
If Dmart improves technology then the cost of production will be decreased which will increase
the Quantity of supply & as supply increases the equilibrium price will decrease increasing
equilibrium quantity respectively.
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