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ECON 200-03 Principles of Microeconomics

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Principles of Microeconomics – ECON 200-03

Name Online Assignment 2 Due: 19/01/2021 by 5.00 AM

(Please type your answers, to dray graphs use Excel spreadsheet or manually with a pen on a paper and copy and paste).

The following table is the data for demand and supply of Tolo Toys Car that is imported to Kuwait.

Table 1: Quantity demanded and quantity supplied for Tolo Toys Car.

Points Price

KD Quantity Demanded Quantity Supplied

A 10 123 63

B 11 118 73

C 13 113 83

D 16 108 93

E 20 103 103

F 24 98 113

G 30 93 123

H 36 88 133

I 44 83 143

Draw a demand and supply curve (in the same graph) and find the equilibrium price and quantity. (10 points)

Considering the children’s toys market has been hit hard as a result of Coronavirus pandemic, the sellers decided to offer 10% discount on the selling price (roundup the decimals to whole numbers). Find the new equilibrium price and equilibrium quantity. (10 points)

Refer to table 1, using the midpoint method, calculate the price elasticity of demand from point B to C and G to H. (10 points)

Discuss the elasticity values between those two points (elastic, inelastic, or unit elastic). (5 points)

Why does the elasticity of demand values tend to change as we move down the demand curve? (5 points)

The equation for a supply curve is P = 2Q – 10. Using the midpoint method, estimate the price elasticity of supply as the price decrease from 6 to 4? (10 points)

Considering the market volatility (constantly changing prices), the importing agent decided to introduce a minimum price for the toy car to be 15KD (no 10% discount). Considering the price control and answer the following questions;

Comment on the proposed 15KD price control (price ceiling/floor; binding/not binding). Explain your answers. (5 points)

How does the 15KD price control affect quantity demanded and quantity supplied? (5 points)

As the oil price continue to be low and reduce earnings from oil revenue ($), the government decided to introduce 2KD per unit tax in non-essential imported goods including Tolo toy car. Refer to table 1 and draw a new demand/supply curve. (10 points)

How much price the buyers will pay after the tax? (5 points)

How much is the buyers’ contribution of the tax? (5 points)

How much is the sellers’ contribution of the tax? (5 points)

How much tax revenue the government will collect? (5 points)

Giving reasons, explain whether the introduction of tax is good or bad for a country (10 points)

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