Name: - Syed Talha Ahmad

Roll No: - 347216

Subject: - Economics

Submitted to: - Sir Inayat Ullah

Ans.1
a)

b)
Percentage change in price = [(5-4)/ ((5+4)/2)] *100 = 22.22%
Percentage change in Quantity demanded = [(104-135)/ ((104+135)/2)] *100=25.9%
Percentage change in Quantity supplied = [(53-26)/ ((53+26)/2)] *100=68.35%
Price elasticity of demand =25.9%/22.22% = 1.16
Price elasticity of demand =68.35%/22.22% = 3.076
c)

Price ceiling is below equilibrium price ($6) hence it will be binding. As the price ceiling is
below equilibrium price, it will lead to an increase in demand. Some sellers will not find it
profitable to sell pizzas so they will stop selling pizzas. This would lead to a decrease in
supply. Hence, decrease in supply coupled with increase in demand will lead to shortage of
pizzas in market as shown in the graph above.
d)

As shown in the graph, price floor is above equilibrium price hence it will be binding
and lead to a surplus of pizzas
e)

As shown in the graph, increase in buyers and sellers will lead to both demand and supply
curves moving rightwards and the equilibrium price will increase.

Ans2

Factors other than Effect on supply Effect on demand Effect on

price curve curve equilibrium price

Rain Shift right Remains same Decreases

Dry season Shift left Remains same Increases
Increase in Remains same Shift right Increases
population
Increase in tax Shift left Remains same Increases
Increase in prices of Shift left Remains same Increases
electricity
1) Rain

Due to rain, supply increases while demand remains constant. Hence, demand curve
is unaffected while supply curve moves to the right and this results in the decrease in
equilibrium price.
2) Dry season

Due to dry season, demand will remain same but the supply will decrease

and the supply curve will shift to left resulting in increase of equilibrium price as

shown in the graph.

3) Increase in population

Due to increase in population, there will be no change in supply however there will
be an increase in demand which will move the demand curve rightwards and increase
the equilibrium price as shown in graph.
4) Increase in tax

Due to an increase in tax, there will be no impact on tomato demand as it is a basic

commodity but it will reduce the supply as many farmers will produce less because of
rising expenditures in production due to which the supply curve will move leftwards and
this will result in the rise of equilibrium price.
5)Increase in electricity prices

Due to an increase in tax, there will be no impact on tomato demand as it is a basic

commodity but it will reduce the supply as many farmers will produce less because of
rising expenditures in production due to which the supply curve will move leftwards and
this will result in the rise of equilibrium price.