Keshav Mahavidyalaya

(University of Delhi)
Introductory Microeconomics-GE-11
Assignment - 2
1. Evaluate the following two statements. Do you agree? Why or Why not?
a. “A tax that has no deadweight loss cannot raise any revenue for the government.”
b. “A tax that raises no revenue for the government cannot have any deadweight loss.”
2. How do interest rates affect household savings? Explain using suitable diagram.
3. (a) Do you agree with the following statement? Explain your reasons.
“A binding price floor and non – binding price ceiling are both greater than the equilibrium price”
(b) Consider a market in which the supply and demand functions are given by the following
equations:
Demand Function: P = 100 – 0.20Q
Supply Function: P = 40 + 0.10Q
(i) Determine the equilibrium price and quantity and compute the price elasticity of demand and
supply at the equilibrium point.
(ii) Determine the effect of Rs. 50/- price ceiling on the price and quantity traded.