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Assignment #2 Corrected

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34 views1 page

Assignment #2 Corrected

Uploaded by

akalewoldkaleab
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Addis Ababa University

Faculty of Business and Economics


Department of Economics
Econ1011: Introduction to Economics
Individual Assignment #2 (10%)
Instructor: Melkamu Delju

Please read carefully and strictly follow the instructions. Answer each question precisely and concisely. Limit your
answers to each question to one page if typed and two pages if handwritten. For typing, use Times New Roman, 12
font size, and 1.5 spacing. It is intended to be submitted before lecture class.

1. Let demand function for three individual consumers is p = ,P= ,&P= .

a. Derive demand schedule of individual at different prices (P) based on perfectly competitive market
structure.
b. Calculate market demand at different prices (P). Show the market demand using graph.
2. In a given hypothetical market, there are three individual suppliers with the following supply functions: Q1 = 8P
– 15, Q2 = 6P – 15, and Q3 = 4P – 15.
a) Calculate quantity supplied by each supplier at different prices.
b) Find quantity of market supply at different prices.
c) Find market equilibrium quantity and price of the good under question #1b and #2b above.
d) Define elasticity of demand. From question #2c above, calculate point price elasticity of market
demand when price increases from $2 to $3.
e) Comment on the relationship between price and quantity demanded and supplied.
3. In the model of demand as well as supply, which variable(s) is/ are controlled to derive the law of demand and
supply? Explain.
4. What are the determinants of price elasticity of demand? Explain.
5. What is income elasticity of demand? Compare it with price and cross-price elasticity of demand.
6. The following table illustrates quantity of three different goods or services demanded at different levels of
consumers’ income.
Quantity Demanded Level of Income per month (in Birr)
(Units per month ) 10,000.00 20,000.00 40,000.00 80,000.00 160,000.00
Tomato 24 18 8 4 2
Olive Edible Oil 2 8 24 48 96
Avocado 4 6 8 12 18
a) Calculate income elasticity of demand for each good when the consumers’ income increases from Birr
20,000.00 to Birr 40,000.00.
b) From question 7a above determine the type of each good.
Due Date and Time: November 8/ 2023 @ 8:00 PM

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