Question1. Using an example of your option, describe Market Equilibrium and elucidate how equilibrium is determined in free market?
Question2. Contrast between a price ceiling and a price floor.
Question3. Make a distinction between the price elasticity of demand, income elasticity of demand, cross elasticity of demand and advertising elasticity of demand.
Question4. Illustrate the usefulness of each of the above concepts to a supplier.
Question5. Compute and interpret the following elasticities:
i. A firm raises the price of product A, from Rs. 0.50 to Rs. 0.60, demand falls from 1000 units a week, to 900 units a week. What is the price elasticity of demand of product?
ii. As a result of a raise in annual income from Rs 2000 to Rs 2400, a man’s expenditure on housing goes up by 20%. Calculate the income elasticity of housing.
iii. After a devastating drought in the rural province of Brazil, the price of coffee rose from Rs 100 to Rs 150 per tones. This lead to a rise in demand for tea in Brazil from 1000 to 2000 tonnes per month. Compute the cross elasticity of demand for tea.