Explain with the help of a neat labelled diagram, what happens to equilibrium price and quantity in the following situations: a. A big increase in demand is followed by a smaller increase in supply. b. A decrease in demand is followed by an equal decrease in supply.
Explain with the help of a neat labelled diagram, what happens to equilibrium price and quantity in the following situations: a. A big increase in demand is followed by a smaller increase in supply. b. A decrease in demand is followed by an equal decrease in supply.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![1. Explain with the help of a neat labelled diagram, what happens to equilibrium price and
quantity in the following situations:
a. A big increase in demand is followed by a smaller increase in supply.
b. A decrease in demand is followed by an equal decrease in supply.
2. When the price of "X" changes from OMR 10 to OMR 15, the demand for "Y changes
from 15525 kgs to 18725 kgs. Calculate cross elasticity of demand for these goods. What
kind of products are “X" and "Y"?
marks)
(2
3. Assume that in the short run a firm is producing 200 units of output, has average total
costs of OMR350, and average variable costs of OMR200. Calculate Fixed costs. Define
fixed costs. (2 marks)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6ce4a690-8cf9-4971-8ea0-540cf7063d62%2F55963b19-e5cb-42f1-a73b-9b35c6c7bab4%2Ff2krt77_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. Explain with the help of a neat labelled diagram, what happens to equilibrium price and
quantity in the following situations:
a. A big increase in demand is followed by a smaller increase in supply.
b. A decrease in demand is followed by an equal decrease in supply.
2. When the price of "X" changes from OMR 10 to OMR 15, the demand for "Y changes
from 15525 kgs to 18725 kgs. Calculate cross elasticity of demand for these goods. What
kind of products are “X" and "Y"?
marks)
(2
3. Assume that in the short run a firm is producing 200 units of output, has average total
costs of OMR350, and average variable costs of OMR200. Calculate Fixed costs. Define
fixed costs. (2 marks)
![4. Ahmed has an income of OMR150 per month that has to be spent on two goods: S
hoes and Jeans. From the following table, estimate the bundle that maximizes
Ahmed's well-being.
Quantity (units)
Shoes (OMR
20/pair)
Marginal Benefits
(OMR)
Jeans (OMR
10/pair)
Marginal Benefits
(OMR)
1
40
35
2
33
33
3
28
22
4
23
15
5
20
10
6
15
7.5
(4 marks)
5. The total cost of a firm is OMR 200, the average variable cost is OMR 16, and the
average fixed cost is OMR 24. How may units of the output does the firm produce?
mark)
(1
6. When the price of milk increases from OMR 1.500 to OMR 3.500, its quantity demanded
falls from 3500 litres to 2000 litres. Find the elasticity of demand . comment on the
degree of elasticity.(2 marks)
7. A firm produces 10 units of output, its total costs are OMR 2250 and average fixed costs
are OMR 125, then find total variable costs. (2 marks)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6ce4a690-8cf9-4971-8ea0-540cf7063d62%2F55963b19-e5cb-42f1-a73b-9b35c6c7bab4%2Fkz4nn5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. Ahmed has an income of OMR150 per month that has to be spent on two goods: S
hoes and Jeans. From the following table, estimate the bundle that maximizes
Ahmed's well-being.
Quantity (units)
Shoes (OMR
20/pair)
Marginal Benefits
(OMR)
Jeans (OMR
10/pair)
Marginal Benefits
(OMR)
1
40
35
2
33
33
3
28
22
4
23
15
5
20
10
6
15
7.5
(4 marks)
5. The total cost of a firm is OMR 200, the average variable cost is OMR 16, and the
average fixed cost is OMR 24. How may units of the output does the firm produce?
mark)
(1
6. When the price of milk increases from OMR 1.500 to OMR 3.500, its quantity demanded
falls from 3500 litres to 2000 litres. Find the elasticity of demand . comment on the
degree of elasticity.(2 marks)
7. A firm produces 10 units of output, its total costs are OMR 2250 and average fixed costs
are OMR 125, then find total variable costs. (2 marks)
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education