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Putting various values we get the P and Q values as below. Same table has been used to plot the
graph
Q 30 0 130 230
P 150 135 200 250
a) Substitute of a good happens when you opt for product A instead of B if price of B goes up.
They complement if demand for A goes up if price of B goes down.
Here Pz leads to increase in demand of X. so Z is a substitute.
For Y since price increase leads to a drop in demand of X, it means Y is a complement to X
b) Normal good is where demand increases as income increases. If demand goes down with
income, its inferior good. In this case demand is increasing with increase in income. So X is a
normal good
c) Putting values
Q= 6000- (5230/2)-6500+9*100+(70000/10)= 4785
d) Demand function is what is given by putting values of Py=6500 and Pz=100 and M=70000
Q=6000-Px/2-6500+9*100+(70000/10)=> Q= 7400-Px/2
Inverse demand means make Px= ….
So Px= (7400-Q)*2
14-P/2=P/4-1, solving we get P=20, and putting this value of P we get Q=4
If govt promises to buy unsold units (24-9)=15 govt will incur 38*15=570
At what max price the quantity demanded will be 0. It will be if 210-1.5P=Q=0, solving we get 140
Similarly at what min price, the seller will not supply anything. That is 2.5P-150=Q=0, P=60
So buyers are willing to pay max 140 and are getting the same at equilibrium price of 75.
Similarly sellers are willing to sell at 60 but are getting equilibrium price of 75.
So consumer surplus per unit= 140-90=50 and producer surplus per unit=90-60=30.
Make the below graph urself. This is from chegg. (kya din aa gaye re. master aaj student bana hua hai)
Price gouging means higher price charged by retailers and suppliers during a period of shortage due to
natural calamity etc. People also end up stocking up these essential commodities immediately before
such a calamity. For example, people in US overpurchased toilet paper at the start of the covid
pandemic/lockdown. Price gouging statutes against price rise mandate that the price during such a
period has to be in line with the last 30 day price trend of the commodity.
While in theory, such statutes seem to be right, it can have adverse economic effects. Since price cannot
be increased, people end up hoarding such commodities. This may also lead to shortages. Now, to plug
this shortage, even if a retail gets fresh supply, there is a constraint not to increase the selling price.
During the time of calamity, the suppliers to these retailers might charge additional charges. However,
the retailer cannot pass on this additional cost to customers due to price gouging limitations. This leads
to continued shortage for majority of the population- particularly the ones who could not afford to
hoard when the stock was available. Further, even if there is some assurance that retails can pass on
‘justified’ additional cost to customers during such times, it is always open to debate and litigation,
thereby further discouraging retailers to get additional supplies at a higher cost of supply. Additionally, it
is often difficult to derive the ‘right’ price of commodities which di not have sufficient history of sales-
for example sale of face masks when the pandemic started. There was no past data to ascertain the
price which would be acceptable. In summary a price gouging statue cause more economic harm than
the social good it intends to bring and the same has been attested in multiple surveys with economists.