Page 47 - DECO101_MICRO_ECONOMICS_ENGLISH

Micro Economics

Notes 4. Using the supply analysis, describe the recent increase in food items worldwide.

5. Over time, the demand for wheat has shifted to the right. Why, do you think, it has
occurred?
6. Analyse the impact of taxes and subsidies on the supply of cigarette and LPG

7. Assume yourself as a manager of any FMCG firm. In what ways supply analysis is
important for you?

8. Consider the following simplified demand-supply functions
Demand: Q = 200 – 2P

Supply: Q = 20 + 4P
What are the equilibrium price and quantity sold? ( Hint: Just equate demand and supply
equations)
9. Given the data below showing the demand and supply of X in a given market:

Price at X per ton (`) 1 2 3 4 5
Demand at X per period (`) 25 16 12 10 9
Supply at X per period (Tons) 3 3 12 14 19
(a) What would be the free market price of X?
(b) What would be the price if demand increased by 4 tons at every price?
(c) What would be the effect of a government’s imposing of a minimum price of ` 5 per
ton in the original situation?
10. Discuss the concepts of price ceiling and price floor with examples.

11. State the factors that affect demand and supply of a commodity. Show the effect
diagrammatically.

Answers: Self Assessment

1. True 2. False
3. True 4. False
5. False 6. Equilibrium
7. higher 8. upward
9. equal to 10. below
11. surplus

3.9 Further Readings

Books Dr. Atmanand, Managerial Economics, Excel Books, Delhi.

G.S. Maddala, Microeconomics: Theory and Application, Tata McGraw-Hill
N. Gregory Mankiw, Principles of Microeconomics, Harcourt College Publications
Samuel Bowles, Microeconomics: Behavior, Institutions and Evolution, Oxford

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