INFOLINK UNIVERSITY COLLEGE

COURSE TITLE: INTRODUCTION TO ECONOMICS

Group Assignment

1. The market for lemon has 10 potential consumers, each having an individual demand
curve, P = 101 - 10Qi, where P is price in dollars per cup and Qi is the number of cups
demanded per week by the ith consumer. Find the market demand curve using algebra.
Draw an individual demand curve and the market demand curve. What is the quantity
demanded by each consumer and in the market as a whole when lemon is priced at P =
$1/cup?

2. . Given market demand Qd = 50 - P, and market supply P = Qs + 5

A) Find the market equilibrium price and quantity?
B) What would be the state of the market if market price was fixed at Birr 25 per unit?
C) Calculate and interpret price elasticity of demand at the equilibrium point.

3. Wheat is traded in a competitive world market, and the price is $0.73 per kilogiram.
Unlimited quantities are available for import into the Ethiopia at this price. The Ethiopia
domestic supply and demand for various price levels are shown below.

Price($) Ethiopia wheat Ethiopia wheat demand

supply (trillion tons.) (trillion tons.)
0.24 6 40
0.44 10 36
0.84 14 32
1.14 18 28
1.44 22 24
1.74 26 20

a. What is the equation for demand? What is the equation for supply?
b. b. At a price of $0.73, what is the price elasticity of demand? At a price of $1.14?
c. What is the price elasticity of supply at $0.73? At $1.14?

4. Consider the following short run production function:

Q 6L3 0.4L2
a) Find the value of L that maximizes output
b) Find the value of L that maximizes marginal product
c) Find the value of L that maximizes average product
5. Given a short run cost function as C Q 3Q2 Q , find the minimum value of AVC
and MC.

6. Suppose a chair manufacturer is producing in the short run (with its existing plant and
Equipment). The manufacturer has observed the following levels of production
corresponding to different numbers of workers:

Number of workers Number of chairs AP MP

7. 1 10
2 18
3 24
4 28
5 30
6 28
7 25
A firm operates in a perfectly competitive market. The market price of its product is 4
birr and the total cost function is given by TC= Q3 Q 2Q, where TC is the
total cost and Q is the level of output.
a) What level of output should the firm produce to maximize its profit?
b) Determine the level of profit at equilibrium.
c) What minimum price is required by the firm to stay in the market?

8. Consider the following information for a particular economy.

Total population = 60 million Number of employed = 30 million
Total labor force = 40 million Natural rate of unemployment = 12%
a) Find the total unemployment rate
b) Calculate the cyclical unemployment rate