Group assignment presentation 2

Ex.1:

(title)
240
220
200
E0
180
160 E1
140
Price 120
($/unit)
100 S0 D1 D0
80
60
40
20
0
0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500
Quantity
(units)

a)
- The general demand equation: P=a−bQ d (1)
∆P 1
Given that b= ; ∆ P=20 , ∆ Qd =100, then b= .
∆ Qd 5
Substitute the value of P; Qd from any point in the line graph and b back into the equation at
(1):
1
120=a− .900 , then a=300.
5
So the demand equation for fridge is: P=300−0.2 Qd
- The general supply equation for fridge: P=c+ d Q s (2)
∆P 1
Given that d= ; ∆ P=20 , ∆ Q s=100 , then b= .
∆Q s 5
Substitute the value of P; Q s from any point in the line graph and b back into the equation at
(2):
1
120=c+ .400, then c=40.
5
So the supply equation for fridge is: P=40+0.2 Q s
- From the above demand equation and supply equation for fridge, Q d =1500−5 P and
Q s =5 P−200.
When the supply quantity is equal to the demand quantity, the market balance will be:
1500−5 P=5 P−200
⇒ P=170
⇒Q=170.5−200=650
In other words, the equilibrium price is $170, and the equilibrium quantity is 650 units.
 b) The surplus of fridge at the price of $200 is: ∆ Q=800−500=300 (units)
The shortage of fridge at the price of $110 is: ∆ Q=950−350=600 (units)
c) Fridge and electricity are complementary goods because fridge runs on electricity. Therefore,
if the electricity price goes up, the demand for fridge will likely go down.
When the quantity demanded for fridge decrease 300 units, we have to construct a new
1 1
demand equation, that is: P=a− Q (2)(d is vertical slope and d= )
5 5
Substitute the value of P; Qd from any point in the line graph and b back into the equation at
(2):
180 = a- 0,2.300 , then a=240
A new demand equation is set: P=240−0,2 Q d
At the point of equilibrium price: 240−0,2Q d=40+0.2 Q s

⇒ P=$ 140
⇒ Q=500
The supply curve and the new demand curve meet at point E, at which the equilibrium price is
$140 and the equilibrium quantity for fridge is 500 units.
d) The government unposes a tax of $10 per one unit of fridge sold. Therefore, the amount of
money manufacturers receive is equal to the amount of money consumers have to pay minus
the tax, or Ps =Pd −10
The supply equation is Ps =40+ 0.2Qs ⇒ Q s=5 Ps−200=5 ( Pd −10 ) −200
The demand equation is Q d =1500−5 Pd
At the point of equilibrium price: 1500−5 Pd =5 ( Pd −10 ) −200
⇒ P=$ 175
⇒ Q=800
e) The new supply function is: Qs =5 ( P+10 )−200=5 P−150
The market balance when the supply quantity is equal to the demand quantity:
5 P−150=1500−5 P
⇒ P=$ 165
⇒Q=675
The equilibrium price is $165 and equilibrium quantity is 675 units.

Ex 2.
1)
 (title)

D1 D

Price
E0

E1

Quantity

Given that the Vietnamese personal income tax rates increase, the demand for motorbikes will
decrease; therefore, the demand curve will shift to the left. Since motorbikes are not essential
products, not buying them will not affect the lives of most people. They would rather spend
money on more vital goods.

2)

(title)

D S1
S

E1
Price

E0

Quantity

Steel is the input for motorbikes, so when the price of steel rises, the supply for motorbikes
would fall. The supply curve will shift to the left
3)
 (title)
S S1
D1 D
14
13
12
11
10
9 E0
8
Price 7
6
5
4 E1
3
2
1
0
0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800
Quantity

The improvement in technology leads to a rise in the supply for motorbikes.

However, during this period, an recession hits the economy, causing the consumer demand to
fall. The supply curve shifts to the right while the demand curve shifts to the left.
As a consequence, equilibrium price and quantity will decrease.