Assignment No #1

BC210426975
Eco401

Question No 1.
Find the equilibrium price and quantity of crude oil.

Solution:-

Qz  250  0.30 p
Qd  340  0.10 p
at equilibrium
Qz  Qd
250  0.30 p  340  0.10 p
0.30 p  0.10 p  340  250
0.40 p  90
P  225
Qd  340  0.10 p
Qd  340  0.10(225)
Qd  340  22.5
Qd  317.5
Qd  Qz  317.5

Question No 2.
Find out the price elasticity of demand of crude oil at equilibrium price and quantity.

Solution:-
 priceelasticity of demand  percentagechangeinquantity demanded
percentagechangein price
priceelasticity of demand 
dQd P
priceelasticity of demand  dP . Q
d (340  0.10 p) P
dP . Q

priceelasticity of demand  0.10

 225 
 
 317.5 
priceelasticity of demand  0.0708

Question No 3.
If the government imposes a tax of Rs. 25/litre and price becomes Rs. 250 per litre then
calculate the quantity demanded and quantity supplied at new price.

Solution:-
P  250
Qz  250  0.30 p
Qz  250  0.30(250)
Qz  325
Qd  340  0.10P
Qd  340  0.10(250)
Qd  315