Group Assignment: Demand & Supply Analysis of Fridges | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Exercise 1 :
1. What are the demand and supply equations, equilibrium price and
equilibrium quantity for fridge? Demand- Supply Curve 250 200 150 e Supply ic Demand Pr 100 50 0 0 200 400 600 800 1000 1200 Quantity
1. The demand and supply equations are the quantity demanded equal to the quantity supplied. P= a- b*Qd so Qd= a/b- (1/b)*P
We have: b=20/ 100=1/ 5 so 100= a- (1/5)*1000, then a= 300 So Qd= 1500- 5*P P= c+ dQs
We have: d= 20/ 100= 1/ 5 so 100= c+ (1/5)*300, then c= 40
And Qs= -c/d+ (1/ d)P= -200+ 5*P
At equilibrium point, we have Qd= Qs= Qe so 1500- 5P= -200+ 5P. We have P= 170.
So equilibrium price is 170 $/ unit. And equilibrium quantity for fridge is 650 units. 2. At the price of $200:
The surplus of fridge are 300 units. At the price of $110:
Qd- Qs= 1500- 5*110- ( -200+ 5*110)= 600
So the shortage of fridge are 600 units.
3. Suppose the supply of fridge is constant, what happened for demand
for fridge if price of electricity increase? Given that quantity demanded
for fridge change 300 units at each price level, what are new
equilibrium price and new equilibrium quantity for fridge? -
If the supply of fridge is constant, the rise in price of electricity will
cause the demand for fridge to decrease. This increase is considered a
non-price factor (price of complementary goods), since we need electricity to run a fridged
- Suppose the quantity demanded for fridge changes 300 units at
each price level we have the new curves demonstrated as below: Change in equilibrium- shif 250 200 150 Supply e ic New demand Pr Demand 100 50 0 100 200 300 400 500 600 700 800 900 1000 1100 Quantity
+ If there’s an addition of 300 units in demand at each level of price,
the new equilibrium price and quantity are $200/unit and 800 units respectively.
+ If there’s a decrease of 300 units in demand at each level of price, the
new equilibrium price and quantity can be found as below:
• At Qd = 0, P = a = 240 ($/unit) - P = 240 – 0.2Qd
• P = 40 + 0.2Qs (Supply is constant)
Pe = 240 – 0.2Qd = 40 + 0.2Qs, Qd = Qs = Qe ó 0.4Qe = 200
Qe = 500 (units), Pe = 140 ($/unit) 4.
4. If the government imposes a tax of $10 per unit of fridge sold: Demand equation P= 300- 0.2Qd 300- 0.2Qd= 50+ (P= a-bQd) 0.2Qs Qd= Qs= Qe= 625
New supply equation P= 50+ 0.2Qs P= 175 (P= c+ dQs) New equilibrium price: $175 New equilibrium quantity: 625 units.
5. Suppose government supports for the sellers the amount of $ 10 per
one units of fridge sold, what are new equilibrium price and new
equilibrium quantity for fridge?
Government subsidy of $10/unit causes increase in supply –non-price factor (Government policies)
New supply curve is seen as below:
If the government supports for the sellers the amount of $10: Demand equation P= 300- 0.2Qd 300- 0.2Qd= 30+ (P= a-bQd) 0.2Qs Qd= Qs= Qe= 675
New supply equation P= 30+ 0.2Qs P= 165 (P= c+ dQs) New equilibrium price: $165 New equilibrium quantity: 675 units. Exercise 2:
1)An increase in Vietnamese personal income tax rates - Their
demand of motor cycle will decrease because the customers have
less money than they used to. They must make a choice and only buy things they really need.
Effect of the increase of Vietnamese income tax rates cause the
shif of the D curve to the lef.
In this case, the equilibrium price and quantity will be shifed
to the lefhand side of the old equilibrium price and quantity.
2)An increase in the price of steel - The supply of motor cycle will
decrease because the price of input resources rises. The
manufacturers will reduce the amount of motor cycle producers to stay their profit.
Effect of the increase of price of steel cause the shif of the S curve to the lef.
In this case, the equilibrium price and quantity will be shifed
to the lefhand side of the old equilibrium price and quantity.
3)An improvement in technology in motor vehicle production at the
same time as a recession hits the Vietnamese economy. - An
improvement in technology in motor vehicle production helps the
supply of motor vehicle production increase so the price will fall.
While at the same time, a recession hits the Vietnamese economy
make the demand fall and the price will drop even further.
Effect of this double event cause the shif of the S curve and
the shif of the D curve to the lef.
In this case, the equilibrium price and quantity will be shifed
to the righthand side of the old equilibrium price and quantity.