MICROECONOMICS

Assignment 2
Name: Le Hoang Phuong Thao
Class: EBBA 15.1

Exercise 1:

1.
- Demand quation: P = a-bQd
With Qd=0 => a= 300
b=20/100= 0,2
So the demand equation is: P=300-0,2Qd
- Supply quation: P = c+dQs
With Qs=0 => c= 40
d=20/100= 0,2
So the supply equation is: P=40+0,2Qs
- Equilibrium quantity is: Pd=Ps => Qe= 650 (units)
- Equilibrium price is: Pe= 40+0,2Qe= 40+0,2.650= 170 ($)
2. At the price of 200$, the surplus is: 800-500= 300 (units)
- At the price of 110$, the shortage is: 950-350= 600 (units)
3. If the price of electricity increase, the demand of fridge will decrease
because people need electricity to run fridge. This is a non-price factor and
electricity is the complementary goods.
- Suppose the quantity demand or fridge change 300 units at each price level.
- When there is 300 units are added to the demand:
 Price
100 120 140 160 180 200
($/units)
Quantity
1300 1200 1100 1000 900 800
demanded
Quantity
300 400 500 600 700 800
supplied

Demand eqution: P= 360-0,2Qd

Equilibrium quantity: Qe= 800 (units)
Equilibrium price: Pe= 200 ($)
- When there is 300 units are minused to the demand:

Price
100 120 140 160 180 200
($/units)
Quantity
700 600 500 400 300 200
demanded
Quantity
300 400 500 600 700 800
supplied

Demand eqution: P= 240-0,2Qd

Equilibrium quantity: Qe= 500 (units)
Equilibrium price: Pe= 140 ($)
4. Suppose gorvernment imposes a tax of $10 per one units of fridge sold:
Suppy equation: P= 50+ 0,2Qs
Equilibrium quantity: Qe=625 (units)
Equilibrium price: Pe= 175 ($)
5. Suppose gorvernment support for the sellers $10 per one units of fridge sold:
Supply equation: P= 30+ 0,2Qs
Equilibrium quantity: Qe= 675 (units)
Equilibrium price: Pe= 165 ($)
Exercise 2:
1. If there is an increase in the Vietnamese personal income tax rates, the
demand of motors will decrease because the price will rise and peole have to
pay more for the motor cycles. The tax makes the D curve in the diagram
move to the left, also the equilibrium price and quantity move to left side.
2. If the price of steel increase, the supply for motor cycles also decreases.
Because the production cost of motor cycles raises. That leads the S curve in
the diagram move to the left, the equilibrium price and quantity move to
lefthand side.
3. If there is an improvement in technology, there will be an fall in price as the
production cost will also decrease. At the same time, the recession in
Vietnamese economy will lead to the decrease in demand of motor cycles.
These events makes S curve move to the right and D curve move to the left
side. The equilibrium price as well as quantity move down.