SEMESTER FALL 2011
Microeconomics (ECO402)
Assignment No. 1
Due Date: 16 November,2011 Marks: 15
Assignment:
The Case:
Pakistan is among the major producers of sugar in the world. Let’s suppose that the
demand and supply functions of sugar industry of Pakistan are:
Qd = 5000 –2P
Qs = 200 + 4P
Over the last few years the country has experienced the worst sugar crisis. As a
result, the price of sugar has remained at very high level. It has been observed that in
winter season, demand for sugar boosts up due to higher demand for tea. Different
measures have been taken by the government to control the price rise to facilitate the
general public. -
Requirements:
i. Find out the price elasticity of demand and price elasticity of supply of sugar
when the industry is in equilibrium. (Marks 4+4)
ii. Since the demand for sugar is price inelastic and supply for sugar is relatively
more price elastic, does an increase in demand for sugar affect quantity more
or price more? Illustrate your answer graphically. (Marks 4)
iii. Calculate shortages or surpluses that occur in sugar industry when
government controls high sugar prices by setting a price limit equal to Rs.600
per bag. (Marks 3)
Instructions:
Please read the following instructions carefully before preparing the assignment solution:
• Calculate to the point where calculation is being required. NO need to write irrelevant
material or extra interpretation.
• This Assignment can be best attempted from the knowledge acquired after watching
video lecture no. 1 to lecture no. 14 and reading handouts as well as recommended
text book.
• Video lectures can be downloaded for free from www.youtube.com/vu.
• Graphs are very important in Economics course. This assignment will enhance your
skill of drawing graphs. A complete procedure of “How to draw graphs in MS-Word” is
uploaded on announcement page of LMS. Get help from that uploaded file to solve
your assignment.
• Draw diagrams by yourself. Do NOT copy from any source. NO need to write
irrelevant material.
Note:
Only in the case of Assignment, 24 hours extra / grace period after the due date is
usually available to overcome uploading difficulties which may be faced by the
students on last date. This extra time should only be used to meet the emergencies and
above mentioned due dates should always be treated as final to avoid any
inconvenience.
Other Important Instructions:
Deadline:
• Make sure to upload the solution file before the due date on VULMS.
• Any submission made via email after the due date will not be accepted.
Formatting guidelines:
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.
Solution guidelines:
• Every student will work individually and has to write in the form of an analytical
assignment.
• Give the answer according to question, there will be negative marking for irrelevant
material.
• For acquiring the relevant knowledge do not rely only on handouts but watch the
video lectures and use other reference books also.
Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0), if:
• It is submitted after the due date.
• The file you uploaded does not open or is corrupt.
• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF
etc.
• It is cheated or copied from other students, internet, books, journals etc.