Assignment 3

Problem 1:
Using demand-supply diagram to analyze the effect on equilibrium price and quantity in the market
of traditional taxi services in Hanoi when:
a. Petrol and oil prices fall;
b. The Grab taxi service’s fare falls;
c. Hanoian citizens prefer to use of public transport;
d. Quarantines requirements due to the covid-19 pandemic asked employees working from home
and also transport service firms reducing their vehicle usage by 50% (each 4-seat car could carry
two passengers only).
Problem 2:
Following table shows the price, quantity supplied and quantity demanded of air conditioner in the
market:

Where: P is the unit price; QD and QS are the quantity demanded and supplied of air conditioner.
a. Find the air conditioner’s supply and demand functions. Compute the equilibrium price and
output?
b. Due to changes in household incomes, the quantity demanded of air conditioners falls by 20% at
every price. What is the new market equilibrium price and output?
c. What factors in the market lead to supply of air conditioner?
d. When the quantity supplied of air conditioner increases by 30 units at every price, what will be
the new market equilibrium price and quantity? (Using the original demand data)
Problem 3:
Supply and demand of apartments for rent in a city is QD = 100 - 5P and QS = 50 + 5P, in which
price (P) in hundred thousand VND per month, quantity (Q) in ten thousand apartments.
a. What is the equilibrium price and quantity?
b. What is the change in city population if the agency sets a maximum average monthly rent of
100,000VND and all those who cannot find an apartment leave the city?
c. Suppose the agency bows to the wishes of the board and sets a rental of 900,000VND per month
on all apartments to allow landlords a “fair” rate of return. If 50 percent of any long-run increases
in apartment offerings comes from new construction, how many apartments are constructed?
(compared with initial equilibrium)
Problem 4:
A battery company has a demand function of:
Qx = 10000 - 200Px + 0.1I + 0.5A - 200Pv
where Qx is the quantity demanded per month for batteries, Px is the price per pair of batteries, I is
the average consumer’s income, A is the advertising budget per month, and Pv is the price of a
flashlight. At the time, Px = 5, I = 15000, A = 5000 and Pv = 10.
a. Compute price elasticity of demand? State the meaning of result.
b. Compute income elasticity of demand? State the meaning of result. Is battery normal or inferior
good?
c. Compute elasticity of demand for variable A? State the meaning of result.
d. Compute cross price elasticity of demand? State the meaning of result. Are battery and flashlight
substitute or complement?
e. Find the battery price that company receives maximum revenue?