Quiz-2

Introduction to Microeconomics- ECO101

Name- ID: Section- Date-

Question 1

1A) What does it mean if XED= -0.30? [1 mark]

a) Neutral goods
b) Complementary and low responsiveness
c) Complementary and high responsiveness
d) Substitutes and low responsiveness
e) Substitutes and high responsiveness

1bi) If the price of cigarettes is 10tk and government imposes a tax of 4tk (tax burden equal for buyers
and sellers). How much does the buyers pay now? [1 mark]
a) 14TK
b) 12TK
c) 10TK
d) 6TK

1bii) If the equilibrium quantity was 10 and new quantity demanded was 8, while willingness to pay is
20tk for cigarettes. What should be the Consumer Surplus after tax? [1 mark]
a) 100tk
b) 50tk
c) 32tk
d) 40tk

1biii) Calculate Dead-weight loss in this case. [2 marks]

Question 2

Suppose you are researching the market of laptops. The demand and supply function of laptops are
given by:
Demand Function: P=100-8QD and Supply function: P= 68-4QS.

Calculate the equilibrium price and quantity. Calculate PED if equilibrium price rises by 10%, and
mention whether the price elasticity of demand is elastic or inelastic.
[5 marks]
 Question 3

Consider two goods: Good A and Good B. The demand function for Good A is given by P = 140-
5QD, and current price of good A is 15tk.

You get to know that the market price of Good B has increased from 10TK to 20TK, this has caused
the demand function for Good A to change and new quantity demanded of Good A be came 20 units.

Calculate cross price elasticity of demand (XED) and comment on the relationship between
Good A and Good B. Mention whether it is elastic or inelastic. 5
marks

GOOD B
p1= 10
p2= 20

GOOD A
P=140-5QD , P1=15
p1= 140-5q1
q1= 25
q2=20