Individual Assignment 2 - Demand and Supply Analysis | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Assignment Presentation 2
Exercise 1:Demand and supply of fridge are shown in the table below:
1. What are the demand and supply equations, equilibrium price and equilibrium quantity for fridge ?
-Demand equation : Qd=f (P) =; P = a- b.Qd
+) 100 = a-b.1000 ; 120 = a-b.900 +) a=300 ; b=0,2 P= 300-0,2.Qd
-Supply equation : Qs = f(P) ; P = c+d.Qs +)100=c+d.300 ; 120=c+d.400 +) c=40 ;d=0,2 P=40+ 0,2.Qs
-equilibrium price and equilibrium quantity can be found at Point E where Pe ;Qe
⇔ Qd=Qs=Qe ; 300-0,2.Qe =40+0,2.Qe
=> Qe =650 ( units) ; Pe =170 ($/unit )
2. What are the surplus and shortage of fridge at the price of $ 200 and $ 110 ?
- At $200 the surplus of fridge surfaces with 800 - 500 = 300 (units)
- At $110 the shortage of fridge surfaces: At this price, the quantity of demand is
950 units and the quantity of supply is 350 units. The shortage is 600 units
3. Suppose the supply of a fridge is constant, what happens to demand for a fridge if price
of electricity increases? Given that the quantity demanded for a fridge changes by 300
units at each price level, what are the new equilibrium prices and new equilibrium quantities for the fridge?
- Suppose the supply of a fridge is constant, the increase in price of electricity will
cause the demand for the fridge to decrease. This increase is considered a
non-price factor (price of complementary goods), since we need electricity to run a fridge.
+ 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 =>0.4Qe = 200
=>Qe = 500 (units), Pe = 140 ($/unit)
4. Suppose the government imposes a tax of $ 10 per one units of fridge sold, what are
new equilibrium price and new equilibrium quantity for fridge?
New equilibrium price and quantity can be found as below :
- P = 300 -0,2 .Qd ( demand is constant) -( P’-10)= 40 +0,2.Qs (new ) -> P’= 50 +0,2 .Qs
Pe = 300-0,2.Qd =50+0,2.Qs ; Qd=Qs=Qe
-Qe =625 (units) ; Pe=175 ($/unit)
5. Suppose the government supports for the sellers the amount of $ 10 per one units of
fridge sold, what are the new equilibrium price and new equilibrium quantity for fridge?
New equilibrium price and quantity can be found as below :
- P = 300 -0,2 .Qd ( demand is constant) -( P’+10)= 40 +0,2.Qs (new ) -> P’= 30 +0,2 .Qs
Pe = 300-0,2.Qd =30+0,2.Qs ; Qd=Qs=Qe
-Qe =675 (units) ; Pe=165 ($/unit)
Exercise 2: With the aid of diagrams, show how each of the following events affects
the supply and/or demand curve for motor cycles. In each case, show and state the
effect on the equilibrium price and quantity.
1. An increase in Vietnamese personal income tax rates
2. An increase in the price of steel
3. An improvement in technology in motor vehicle production at the same time as a
recession hits the Vietnamese economy
1. An increase in Vietnamese personal income tax rates - The demand quantity
reduce => The demand curve shift move to the left => The equilibrium price and
the equilibrium are decline too
2. An increase in the price of steel - The supply of motor cycles will decrease
because the price of input resources rises. The manufacturers will reduce the
amount of motorcycle producers to stay profitable.
=> Effect of the increase of price of steel causes the shift of the S curve to the left.
In this case, the equilibrium price and quantity will be shifted to the left hand 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,
making the demand fall and the price will drop even further.
=> Effect of this double event causes the shift of the S curve and the shift of the D curve to the left.
In this case, the equilibrium price and quantity will be shifted to the right hand
side of the old equilibrium price and quantity.