Assignment 2 - Economic Equilibrium Analysis of Fridges and Motorcycles | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Microeconomics E-BBA 16.1, Tran Thi Hong Viet, Ph.D
GROUP ASSIGNMENT PRESENTATION 2 : Group 9 - EBBA 16.1 : Nguyễn Phương Mai Phạm Ý Dương Đặng Trung Đức Nguyễn Ngọc Linh Nguyễn Minh Tuấn Exercise 1.
1. The demand and supply equations, equilibrium price and equilibrium quantity for fridge: - The demand equation for fridge is: Qd = f(P); P = a – bQd
→ At Qd = 0, P = a = 300 ($/unit) → b = 20/100 = ⅕ P = 300 – 0.2Q ⇒ s - The supply equation for fridge is: Qs = f(P); P = c + dQs
→ At Qs = 0, P = c = 40 ($/unit)
Microeconomics E-BBA 16.1, Tran Thi Hong Viet, Ph.D → d = 20/100 = ⅕ P = 40 + 0.2Q ⇒ s
- The equilibrium price and equilibrium quantity can be found at point E where:
Pe = 300 – 0.2Qd = 40 + 0.2Qs; Qd = Qs = Qe → 0.4Qe = 260 → Qe = 650 (units) → Pe = 170 ($/unit)
=> The equilibrium price for fridge is: 170 $/unit.
=> The equilibrium quantity for fridge is: 650 units.
2. The surplus and shortage of fridge at the price of $200 and $110 :
- At $200: The quantity demanded for fridges is 500 units and the quantity supplied is 800 units.
→ As a result, the surplus is: 800 - 500 = 300 (units)
- At $110: The quantity demanded for fridges is 950 units and the quantity supplied is 350 units.
→ As a result, the shortage is 950 - 350 = 600 (units) 3.
a) Suppose the supply of fridge is constant: The demand for fridge will
decrease if the price of electricity increases. Because:
● When the electricity price rises, the price of the product will increase.
● According to the law of demand, the quantity demanded will decrease.
b) If the quantity demanded for fridge change 300 units at each price level : - We have: b = 20/100 = ⅕
- Substitute the values of b and P, Q of any point in the equation: 100 = a - ⅕ 700 → a = 240
Microeconomics E-BBA 16.1, Tran Thi Hong Viet, Ph.D - The new demand equations for fridge is: P = 240 - ⅕ Qd → Qd = 1200 - 5P
- The new equilibrium price and quantity are: Qe = Qd = Qs → 1200 - 5P = 5P - 200 → P = Pe = 140 ($/unit) → Qe = 500 ( units)
=> The new equilibrium price is: 140 $/unit.
=> The new equilibrium quantity is: 500 units.
4. Suppose government imposes a tax of 10$ per one unit of fridge sold: - The new supply function is: P = 50 + ⅕ Qs2 → Qs = 5P - 250
- The market will be balanced again if the quantity supply equals the quantity demand: Qs = Qd → 5P - 250 = 1500 - 5P → P = Pe = 175 ($/unit) → Qe = 625 ( units)
=> The new equilibrium price is: 175 $/unit.
=> The new equilibrium quantity is: 625 units.
5. Suppose government support for the sellers the amount of 10 per one unit of fridge sold :
- A $10 subsidy shifts the supply curve downwards by $10, making the new supply function: Qs = −200 + 5(P+10) - Simplifying:
Qs = −200 + 5P + 50 = −150 + 5P - Find the new equilibrium: 1500 − 5P = −150 + 5P 1500 + 150 = 10P ⇒1650 = 10P ⇒ P = 165
Microeconomics E-BBA 16.1, Tran Thi Hong Viet, Ph.D - The new equilibrium quantity:
Q = 1500 − 5(165) = 1500 − 825 = 675
=> The new equilibrium price is: 165 $/unit.
=> The new equilibrium quantity is: 675 units. Exercise 2.
1. An increase in Vietnamese personal income tax rates:
This change will shift the demand curve to the left.
→ Result: The price will decrease and the number of motorcycles sold will also fall.
2. An increase in the price of steel:
The production costs will increase, the supply line will be shifted to the left.
→ Result: Motorcycle prices increased and the number of sales decreased.
Microeconomics E-BBA 16.1, Tran Thi Hong Viet, Ph.D
3. An improvement in technology in motor vehicle production at the same
time as a recession hits the Vietnamese economy: - Impact:
● Improved Technology: Shifts the supply curve to the right (increase in supply).
● Recession: Shifts the demand curve to the left (decrease in demand). - Outcome:
● If the increase in supply due to technological improvement is greater
than the decrease in demand due to the recession, the equilibrium price
will decrease and the equilibrium quantity will increase.
● If the recession’s impact on demand is stronger, the equilibrium price
and quantity will both decrease.
=> The combined impact of increased supply and decreased demand will
depend on the relative strength of each factor, but overall, significant changes to
the motorcycle market equilibrium are expected.