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5. Price Elasticity of Demand Electricity 0.12 Foreign Travel 1.5 Jewellery 2.9 Based on the Table Above, Explain the Price Elasticity of Demand Value of the Three Goods and Services and of What Use Is This

In: Business and Management

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Words 465
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PRINCIPLES OF ECONOMICS
ASSIGNMENT(20%)

Questions

1. The demand and supply schedules for wheat are as follows:

|Price | Quantity demanded Quantity supplied |
| |(kilogram) (kilogram) |
|10 | 1000 400 |
|20 | 900 520 |
|30 | 800 600 |
|40 | 700 700 |
|50 | 600 800 |
|60 | 500 900 |
|70 | 400 1000 |

a) Plot the graph and explain how the equilibrium price is achieved. (6marks)

b) What is the new equilibrium price and quantity if the government gives a subsidy of $5 per kilogram. (4 marks)

c) Suppose the government set a minimum price of $60 and agreed to buy any resulting surplus to stockpile it. How much would they have to spend in the first year? Explain and indicate in the diagram. (6 marks)

2. Suppose that in order to support good health by reducing fat consumption, the government decided to levy tax on French fries by charging fast food restaurants

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