MICROECONOMICS (ECO402)

ASSIGNMENT NO. 1

(BC230207348)

I. Calculate the equilibrium price and equilibrium quantity of Oppo smartphones in

the year 2022 using the given demand and supply functions.

Qd = 20100 – 0.3P
Qs = 100 + 0.7P

Equilibrium Price

Qs=Qd

100 + 0.7P = 20100 – 0.3P

0.3P + 0.7P = 20100 – 100

1P = 20000

P = 20000

Equilibrium Quantity

Qs = 100 + 0.7P

Qs = 100 + 0.7(20000)

Qs = 100 + 14000

Qs = 14100
 II. Graphically show the impact of an increase in production cost on the equilibrium
price and equilibrium quantity of Oppo smartphones. Explanation is not required
in this part.

32000
28000
24000
Price 20000
16000
12000
8000
4000
4000 6000 8000 10000 12000 14000 16000 18000

Quantity

III. Calculate the price elasticity of the supply of Oppo smartphones when its price
increases from Rs.15,000 to Rs.20,000 and interpret the result.

PRICE ELASTICITY OF SUPPLY

Ep = ∆Q
∆P

% change in Quantity = 10100-14100 x 100

(10100+14100)/2

= -4000 x 100
24200/2

= -4000 x 100
12100

= -0.3305 x 100

= -33.05%
% change in Price = 20000-15000 x 100
(20000+15000)/2

= 5000 x 100
35000/2

= 5000 x 100
17500

= 0.2857 x 100

= 28.57%

Ep = ∆Q
∆P

= -%33.06
%28.5
= -1.157