Срочное контрольная работа section b answer all questions

Срочное контрольная работа
SECTION B

Answer all questions. These are LONG-ANSWER QUESTIONS. Each question accounts for 20 marks.



1. Using appropriate diagrams, explain how the use of concept of price elasticity of demand can help firms to maximize revenue.
(20 marks)

2. Assume we measure the quantity of good X on the horizontal axis and the quantity of good Y on the vertical axis. Illustrate on two separate indifference diagrams the income and substitution effects of the following:
a) An increase in the price of good X (and no change in the price of good Y)
b) An decrease in the price of good Y (and no change in the price of good X)

(20 marks)

3. Consider the market of product A which can be described by the following demand and supply functions:
+3P

a) Find the equilibrium price and quantity for that market (5 marks)
b) Assume that the government decides to set a maximum price for product A. What will be the effect if it sets this price at 14? Explain your answer. (5 marks)
c) Discuss three problems that can occur when the government imposes maximum prices (6 marks)
d) Suggest two methods how the government may deal with the shortages associated with maximum prices (4 marks)
(20 marks)