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HEMAL PATEL

100605391

Supply and Demand Assignment

MARKET FOR TABLETS


1. A) Explain what you believe is the elasticity of demand. Is it elastic or inelastic?
Explain why?
Market of tablets is ELASTIC because tablet include in luxury product as well as there is
many close substitutes for a product are available in market such as (computer, laptop,
smartphone) so in there is small change in price of causes a larger percentage change in
quantity demanded.
b.

Draw a simple supply and demand graph with a demand curve shape that
illustrates the elasticity of demand for this market. Explain why the demand
curve is this shape.

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D
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75000

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Percentage change in price causes a larger percentage change in a product's quantity


demanded, the product has elastic demand. Because of elastic demand in the
tablets market. In price decrease of tablet cause, greater demand for tablets pushes
demand to the right.

c.

If there were a 10% price increase, estimate the percent change in quantity
demanded based on your statement about elasticity in a. above. Then
calculate the elasticity of demand coefficient based on your estimated change
in quantity demanded.

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D
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Increase price by 10% from $500 to $550, quantity demanded decreases


from 75000 to 50000 tablet so change in quantity is greater than change in
price so thats why demand curve is elastic.

2. Identify and explain one factor that has caused a shift in the demand curve.
Illustrate the impact on the market using supply and demand curves.
Decrease in price of a substitute.
Smartphone and tablets are close substitute. If smartphone price decrease
that shift tablets demand curve towards the left because people are buying
more smartphone than tablets. As shows in chart before smartphones price
decrease quantity demand was 50000 units the equilibrium point is {A}. when
smartphone price decrease demand curve shifted to left and new equilibrium
point is {B}.

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D
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3. Identify and explain one factor that has caused a shift in the supply curve.
Illustrate the impact on the market using supply and demand curves.
Advancement in Production technology
Technological become advances and tablets companies get new machinery that make
product at chipper cost and more efficient way that decrease production cost because of
that production efficiency increase and the supply curve shifted to the right.
As shown in chart before getting new machine supplyer supply 50000 units at $550 [A]
because of new machine supplyer supply 75000 untis at $500 and the new equilibrium
point is [B]

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D
25000

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150000

4. Identify and explain one government intervention relating to this market. Explain the
governments economic objective and illustrate the impact on the market using supply
and demand curves.

EXCISE TAX

one of the most important government intervention in this market is excise tax on
luxury goods if government imposes $100 excise tax on tablets
A $100 excise tax on Tablets that shift supply curve to S1. At the initial equilibrium, consumers
pay a price of $400 (D) and producers receive a price of $300 (point c). At the new equilibrium,
consumers pay a price of $325, supplier receive a price of $225. Because Demand is elastic,
producers pay more of the tax than customer. So consumer pay $25 whereas supplier pay $75
400

S1

325
C

300
A

225

D
25000

50000

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125000

150000