Answered: (i) Calculate the equilibrium price and…

(i) Calculate the equilibrium price and quantity in the domestic market of Sri Lanka. (ii) Calculate the price elasticity of demand at the equilibrium price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please Show Each and Every Working VERY CLEARLY. There are NO multi-questions here, only just multi-PART questions which are CONNECTED to each other, and hence, Please do NOT Leave any, Thank You! Please Answer (i)

Q3.Sugar, which is an essential product in Sri Lanka and other countries, has different
demand and supply curves in different countries due to the difference in technology,
location, weather, people consumption patterns, preferences etc. Assuming that the supply
and demand curves in the Sri Lankan sugar industry are: (Assume the local price is also in
dollars ($)
Supply of Sugar in Sri Lanka (Unit: 1000 KGs) Qs = P
Demand of Sugar in Sri Lanka (Unit: 1000nKGs) Qd = 4 – P

(i) Calculate the equilibrium price and quantity in the domestic market of Sri Lanka.
(ii) Calculate the price elasticity of demand at the equilibrium price
(iii) As a policy maker, if you decided to reduce price, how it affects the income of local
sugar producers
(iv) In 2020 the price of the world sugar market is $1.50. Assuming a $1.00 tariff per KG :
no other trade barriers, show the equilibrium of the sugar market in Sri Lanka.
(v) In 2021, if the government reduces tariff by $0.50 per KG, how does it affect Sri Lank
society (consumers, local producers and the government)?
(vi) Without introducing tariffs, how would the government support the local sugar
producers in a liberalized economy?
(In addition to all calculations, draw the supply and demand curves to explain your answer
in each section)
voITAVIMAX

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