ECO401 Economics Assignment No.1 Fall Semester 2012

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ECONOMICS (ECO401)
FALL 2012
ASSIGNMENT NO. 1
Part A:
Keeping in view the demand supply conditions of Toyota cars given in the table:
a. Calculate the point elasticity of demand and supply of Toyota cars from
August-July 2011.
Point elasticity=
Point Elasticity for demand=
=
=
=1.114
Point Elasticity for supply =
=
=
=1.053

b. Calculate the Arc elasticity of demand and supply of Toyota cars from
December-July 2011.
Arc elasticity=
Arc elasticity for demand=
=
=
=1.56
Arc elasticity for demand=
=
=
=1.052

Part B:
a. Why the sales revenue of Toyota cars has decreased in 2012? Elaborate
your answer by keeping in view the calculated answers in part A.
Because according to the part A calculation the demand of cars are elastic. so by increasing the price the demand will decrease.

b. What will be the effect on the equilibrium situation of Toyota cars demand
curve as Toyota did not converted their cars on Euro-II standards? Illustrate
graphically by taking supposed equilibrium condition of Toyota cars.


price(P) demand curve supply curve












Quantity(Q)


Suppose above is equilibrium condition then the change will be the demand curve will move down…





price(P) demand curve supply curve












Quantity(Q)




c. As an Economic advisor, if you suggest Pakistan’s department of
transportation to impose costly regulation on manufacturers of imported in
order to facilitate domestic infant industry. What will be the impact of costly
regulation on the equilibrium situation of Toyota cars? Illustrate graphically.


price(P) demand curve supply curve












Quantity(Q)


Suppose above is equilibrium condition then according to the detail in question the demand will increase.




price(P) supply curve












Quantity(Q)