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NMIMS Global Access
School for Continuing Education (NGA-SCE)
Course: Business Economics
Internal Assignment Applicable for December 2015 Examination
Assignment Marks: 30
Q1. There is a fruit seller who has 30 kgs of apples to be sold and he wants to fix a price so that all the apples are sold. There are three customers in the market and their individual demand functions are given below:
D1=25-.05P
D2=20-.025P
D3=15-.075P
Where D is the demand and P is the price
Determine :
- Market demand equation for the fruit seller (2.5 marks)
Answer : (a) Market demand equation:
D1 = 25 – 0.05p ………………………………… 1
D2 = 20 – 0.25P ………………………………… 2
D3 = 15 – 0.75P ………………………………. 3
- Price at which he can sell all the apples (2.5 marks)
Answer : According to equilibrium price,
D = S
60 + 1.5P = 30
60 + 1.5p +50p = 30 + 50p
60 + 51.5p = 30 + 50p1.
60 + 51.5p +100 = 30 +50p +100
- Individual demands of each of the three customers (5 marks)
Answer : Individual demand at this price :
D1 = 25 – 0.05x 20
= 25 – 1
Q2. a) Determine the market equilibrium price if the demand and supply function is given as:
D = 12p + 8
S = 14p – 4 (5 marks)
Where D= demand
S=supply
p= price
Answer : (a)
At Equilibrium market price, Qd = Qs
Hence D=S
- b) Determine the equilibrium quantity if price is the same as above
D = 4p – 4q
S = 8q – 4p (5 marks)
Where D= demand
S=supply
p= price
q= quantity
Answer : where D = 4p- 4q
S = 8q – 4p
By putting the value of equilibrium price in above equations, we get
D =4(6) -4q
- a) Suppose the monthly income of an individual increases from Rs 20,000 to Rs 25,000 which increases his demand for clothes from 40 units to 60 units. Calculate the income
elasticity of demand. (5 marks)
Answer: Income Elasticity Of Demand =% change in quantity demanded
% change in income
- b) Quantity demanded for tea has increased from 300 to 400 units with an increase in the
price of the coffee powder from Rs 25 to Rs 35. Calculate the cross elasticity of demand
between tea and coffee. (5 marks)
Answer : If quantity demanded of product tea is increases with the increase in price of coffee powder, there is cross elasticity of demand.
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