ECO401 Assignment No 1 Spring 2018

ECO - 401 Assignment No 1 Solution Spring 2018

Here, I am providing you "Solution of ECO-401  Assignment No 1 due date is 23-05-2018" 

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ECO 401  Assignment Solution: 

Demand function for wheat crop

Q_d =15000-30p+p²

Demand function for sugarcane crop:

Q_d =12000-20p+2p²

Q1. 

 

a) If market price of wheat is Rs.1300 per ton Q_d =15000-30p+p²

Q_d=15000-30(1300) + (1300)²

Q_d= 15000-39000+1690000 Q_d=1666000 dQ / dP= -30+2P dQ/dP =-30+2(1300) dQ/dP = 2570

The formula of elasticity = (dQ / dP) (P/Q)

                              =2570*(1300/1666000)

                                =2.01

 

b. If market price of sugarcane is Rs. 180 per ton. 

Q_d =12000-20p+2p²

Q_d = 12000-20(180) +2(180)²

Q_d =12000-3600+64800 Q_d = 73200

dQ / dP= -20+4p dQ / dP= -20+4(180) dQ / dP= -20+720 dQ / dP=700

The formula of elasticity = (dQ / dP) (P/Q)

                               =700*(180/73200)

                                 =1.72

Q2.

Subsidies for producers increase supply and the quantity demanded by consumers. The government provides production subsidies whenever it is in the interest of the public in order to meet demand. As the producer increases supply, the cost of production is reduced, allowing the supplier to profit from both the subsidy and lower costs. As the result prices also decreases of   Agricultural products in domestic market  

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