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  • Eco 402 Assingment

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    shahbaz shahid
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    The equilibrium price of rice in the domestic market is 180 rupees, where the quantity demanded of 90,000 equals the quantity supplied of 90,000. The price elasticity of supply of rice when the price is 160 rupees is 0.372. This value represents an inelastic supply, meaning that changes in price have little effect on the quantity supplied. If the government supports rice producers, increasing the number of suppliers in the domestic market, the equilibrium price will decrease from P1 to P2 while the equilibrium quantity will increase from Q1 to Q2, as the increased supply shifts the supply curve to the right.

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    The equilibrium price of rice in the domestic market is 180 rupees, where the quantity demanded of 90,000 equals the quantity supplied of 90,000. The price elasticity of supply of rice when the price is 160 rupees is 0.372. This value represents an inelastic supply, meaning that changes in price have little effect on the quantity supplied. If the government supports rice producers, increasing the number of suppliers in the domestic market, the equilibrium price will decrease from P1 to P2 while the equilibrium quantity will increase from Q1 to Q2, as the increased supply shifts the supply curve to the right.

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    2 views3 pages

    Eco 402 Assingment

    Uploaded by

    shahbaz shahid
    The equilibrium price of rice in the domestic market is 180 rupees, where the quantity demanded of 90,000 equals the quantity supplied of 90,000. The price elasticity of supply of rice when the price is 160 rupees is 0.372. This value represents an inelastic supply, meaning that changes in price have little effect on the quantity supplied. If the government supports rice producers, increasing the number of suppliers in the domestic market, the equilibrium price will decrease from P1 to P2 while the equilibrium quantity will increase from Q1 to Q2, as the increased supply shifts the supply curve to the right.

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    of 3

    Requirements;

    A. What is the equilibrium price and equilibrium quantity of rice in domestic


    rice market?

    Solution
    We know that Equilibrium Price in that price in which Quantity demanded is
    equals to Quantity Supplied.
    In the given table RS 180 is equilibrium price at which quantity demanded
    which is 90,000 becomes equal to quantity supplied which is also 90,000.
    Also show in market equilibrium graphically.

    P
    S
    P0

    Q0 Q

    B: Calculate price elasticity of supply when price of rice is rupees 160


    The formula to calculate Price Elasticity of Supply is
    Price Elasticity of Supply
    ΔQ/ΔP X P/Q
    1. ΔQ= Q2-Q1

    ΔQ=02-01
    ΔQ= 90.000-86,000
    ΔQ= 4000

    2. ΔP= P2-PI

    ΔP=P2-P1
    ΔP =180-160
    ΔP=20

    Putting Values in Equation:


    ΔQ/ΔP X P/Q
    4000/20 x 160/86.000
    By simplify them =64/172
    Price elasticity of supply is=0. 372

    C: What does the value of elasticity of supply calculate in part 8 represent?

    Solution:
    In the calculations of Price Elasticity of supply160 we get 0.372 values
    Price Elasticity of Supply=0.372 It means that the Price Elasticity of Supply at
    this price is inelastic because when its value is less than 1 it is inelastic means
    there is no effects of price on Quantity Supplied.
    D. Suppose government has given support to rice producers and as a result,
    numbers of suppliers of rice in domestic market are increased. Graphically
    analyze the impact of this situation on equilibrium price and equilibrium
    quantity of ri
    P1

    P2

    Q1 Q2 Q

    Effects: When Quantity Supplied Increases


    Equilibrium Price will be Decreases
    Equilibrium Quantity will be increase

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