Module 1

Questions on Demand –
Supply & Equilibrium

23/05/2023
Numericals

Problem : Jenn's parents increase her allowance, so she spends more

money on candy every week. How can you explain this with a graph?
Numericals

Problem : Kris and Tim's demand

curves for playing cards look like
this.

Who wants more when the price is

$3 a pack? $4 a pack? What is
their combined demand at $4 a
pack?
Numericals

Problem : Emily decides to set aside $200 from her

paycheck every month.

How will this affect her demand curve?

(You don't have to use specific numbers, just

explain)
Numericals

Problem : If the demand and supply curve for computers is:

D = 100 - 6P, S = 28 + 3P

Where P is the price of computers, what is the quantity of computers

bought and sold at equilibrium?
Numericals

Problem : If the demand and supply curve for computers is:

D = 100 - 6P, S = 28 + 3P

Where P is the price of computers, what is the quantity of computers

bought and sold at equilibrium?
Numericals

Problem : The quantity demanded of Good Z depends upon the price

of Z (Pz), monthly income (Y), and the price of a related Good W
(Pw).

Demand for Good Z (Qz) is given by equation 1 below:

Qz = 150 - 8Pz + 2Y - 15Pw

Find the demand equation for Good Z in terms of the price for Z (Pz),
when Y is $50 and Pw = $6.
Numericals

Problem : Wheat supplies are sharply reduced because of drought in

the wheat-raising states, and consumers turn to Paddy as a substitute
for Wheat.

How would you illustrate this change in the Wheat market in supply-
and-demand terms?
Numericals

Problem : In December, the price of Christmas trees rises and the

number of trees sold also rises.

Is this a violation of the law of demand?

Numericals

Slope is same as Ped.

Problem : Find the slope of an assumed linear demand curve for

theater tickets, when persons purchase 1,000 at $5.00 per ticket and
200 at $15.00 per ticket.
Numericals

Slope is same as Ped.

Problem : Given the following data:

WIDGETS P = 80 - Q (Demand)
P = 20 + 2Q (Supply)

Given the above demand and supply equations for widgets, find the
equilibrium price and quantity.

WIDGETS P = 80 - Q (Demand)
P = 20 + 2Q (Supply)

Now suppliers must pay a tax of $6 per unit. Find the

new equilibrium price-inclusive price and quantity.
Numericals

Slope is same as Ped.

Which of the following factors will cause the demand curve for
labor to shift to the right?

(a) the demand for the product by labor declines.

(b) the prices of substitute inputs fall.

(c) the productivity of labor increases.

(d) the wage rate declines.

(e) None of the above.

 Module 2

Production Function

23-05-2023
Introduction

• In economics, it is sometimes necessary to relate

input with output.

• In order to understand the input invested and how

much of it is required to gain a certain amount of
output, economists establish production functions
that show the relationship between inputs and
output.
What is Production Function?

• The production function of an organization or

enterprise is an association between inputs used
and the utmost amount of outputs that can be
manufactured.

• In other words, the production function is the

relationship that shows the relationship between
inputs and outputs for any given amount of inputs
invested and the maximum amount of outputs
obtained in the production process.
Example of Production Function

• Let us assume that a car manufacturer is mentioned in

the introduction of the production and cost.

• Let us assume that he utilizes only 2 inputs to

manufacture a car: the spares made of metal and labor.

• A production function would then show the maximum

number of cars he can manufacture using the resources
and number of hours he invests (labor) in the process.
Example of Production Function

• Suppose the manufacturer uses 20 units of spares and

2 hours of time a day to produce 1 car in a week. A
function that shows this association is called a
production function.

• Suppose we represent the function as -

• q=K×L

• Where q is the number of cars produced,

• K is the spares required, and

• L is the number of hours worked in a day.

Technology & Production Function

• Production functions are dependent upon

technology. As new technology is used, the
production of units usually goes up.

• This means that introduction of technology

works as an enhancer of the production
function.

• So, when technology is upgraded, we will

have a new production function for the
given example above.
Writing the Production Function

• The inputs used in the process of production functions are known

as factors of production.

• Usually, companies need different amounts of different inputs in

order to get the desired amount of output. If we contemplate that a
company needs only two factors of production to get desired
outputs. These two factors of production, let’s say, are capital and
labor.

• Therefore, the production function will be

• q = f (C, L)

• where q is the output,

• C is the capital required and

• L is the labor invested.