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(solution) Question-1 : Suppose that you have been hired as an Economic

__Question-1____:__ Suppose that you have been hired as an Economic Researcher by OPEC and given the following schedule showing the world demand and supply for oil:

Price (P) ($/barrel) | Quantity Demanded (Q (millions of barrels/day) | Quantity Supplied (Q (millions of barrels/day) |

10 | 60 | 20 |

20 | 50 | 30 |

30 | 40 | 40 |

40 | 30 | 50 |

50 | 20 | 60 |

__Answer the following questions: __

- At what price, the oil market will be in equilibrium situation?
- If OPEC produces 50 million of barrels/day, calculate its Total Revenue (TR)?
- If the price of oil rises from $40 to $50 per barrel, what will be the Total Revenue (TR) from oil sales? Also mention either TR will
__increase__or__decrease__? - When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Demand (E
_{d})? - When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Supply (E
_{s})?

__ __

__Question-2__: Define the Law of Supply? Keeping in view the *Law of Supply*, how the following factors will shift the supply curve? (Each answer must be supported by a neat diagram):

- If costs of raw material increases in the plastics industry;
- If new technology is introduced in the automobile manufacturing;
- If OPEC decides to reduce oil prices in the Gulf Region;
- Ifgovernmentintroducessomenewtaxesintheconstructionsector.
__Question-3__:Defineandexplain*'LawofDiminishingReturns*withthehelpofdiagram.Whatarethedifferentstagesofproductionintheshortrun?__Question-4__:Defineandexplain*'PriceDiscrimination(PD)'*withthehelpofdiagram.AlsogiveexamplesofPriceDiscriminationfromtherealworld?- Question-5:

Suppose the quantity demanded of good (Qd) depends only on the price of the good (P), monthly income (M), and the price of a related good R (PR):

- Construct the demand curve for the good when M = $1,000 and PR = $5. The equation for demand isQ
_{d}= ________________________b. Interpret the intercept and slope parameters for the demand equation in part a.c. Let income decrease to $950. Construct the new demand curve. This good is _____________________ (normal, inferior). Explain using your graph.d. For the demand curve in part c, find the inverse demand function:P = _____________________.

e. Let the price of good R increase to $6 (income remaining at $950). Construct the new demand curve. Good R is a _______________________ (substitute, complement) good. Explain using your graph.

f. For the demand curve in part e, find the equilibrium price and quantity when supply function is as under;

PE = ____________ and QE = ____________

Construct the supply curve and verify your answer by showing equilibrium price and equilibrium quantity graphically

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DATE ANSWEREDSep 13, 2020

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