Question

5. Construct an example and solve with Supply and Demand analysis one of each of the following. Name and graph the market of analysis and contingent markets, if any. (4 points each, and 1/2 extra point possible for each if I think the example is clever and unique. You may collude to attain product differentiation)

Answer 1

5 m) Some definitions to be kept in mind? 1D Competitive Market: - A market condition controls the market & to provide goods & where no single producer competes with other producers service .. 2) Perice Floor, It is an go pri imposed price, usually by a gout. which dictates boo the minimum price of a good or services. Price floor is always above equillibrium price, do feri

Example I Market + of analysis? Onions. Price floor Fig ① xonise lunit yam's lunit 5 2 osob. I a - 5 10 15 20 25 30 35 40 x Fig 0 represents a competitive market for onions. X asus represents quantity & y arris represents price. carne s & curve o are curved for supply and demand respectively. Let us suppose , S & D shows the equilibrium equilibrium quantity intersect at prices as $8 as 20 units. point c, which and Now, suppose the gout. imposes a price floon at $12 for this market. Seeing the use in price producers will increase production & therefore I supply in the market, which according to the graph would be 30 units. However, the demand would fall to 10 units due to a rise in puice. Therefore, there will be an excess of 20 units of produce in the market which will lead to loss for the

5n producer. Therefore, a price floor will push the market into disequi li brium eis shown in the graph. Definitions: Net imports: An economy which imports more than it exports, Tariffs : A tase imposed on imports from other economies. Geample: dil market. ya Tarido a = lunits Pº 5 10 15 20 25 30 35 x Quantity Fig ③ represents the market for oil. Cowes D l s represent demand and supply and intersect at equillibrium point, c.

Now, if the overnment imposes a tariff of 810, the new price of oil would suze to $25. The supply of oil would jump to 30 units, but the demand would fall to 10 units. This policy of imposing Tariff will be effective if the goot wishes that its citizens reduce usage of oil products like diesel and instead adept renewable sources of energy. In short, tariffs are imposed to eliscourage consumers from purchasing foreign fee goods. to achieve certain policy goals.