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BEcon 22-23 S1 T Q2

The document contains tutorial questions for a Business Economics course, focusing on demand curves, buyer surplus, and market dynamics under price controls. It includes specific scenarios involving cigarette demand, the demand for good X, and the impact of a price ceiling on vaccine pricing. Additionally, it addresses market equilibrium and government subsidies in a competitive market context.

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chunhincheung8
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9 views1 page

BEcon 22-23 S1 T Q2

The document contains tutorial questions for a Business Economics course, focusing on demand curves, buyer surplus, and market dynamics under price controls. It includes specific scenarios involving cigarette demand, the demand for good X, and the impact of a price ceiling on vaccine pricing. Additionally, it addresses market equilibrium and government subsidies in a competitive market context.

Uploaded by

chunhincheung8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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2022/23 Semester 1

BHMH2105 Business Economics


Tutorial Questions (Topic 2)

Q1. (present by Group 1)


The demand curve for cigarette is given by Qdx = 46 – 4Px.
a. Sketch the demand function on a graph.
b. What is the quantity demanded and how much buyer surplus do consumers have
when Px = $9? Represent this by means a sketch on the graph.
c. How much buyer surplus do consumers have when Px = $8?
d. Now suppose the seller first sets the price at $9. After all who like to buy the cigarette
have bought the quantity they desire, the seller then unexpectedly lowers the price to
$8. What is the total quantity of cigarette sold and what is the consumer surplus?
Represent this pricing arrangement on a graph.

Q2. (present by Group 2)


The demand function for good X is given by Qdx = 6,000 – 1/2 Px – Py + 9Pz + 1/10 M.
Research shows that the prices of related goods are given by Py = $6,500 and Pz = $100,
while the average income of individuals consuming this product is M=$70,000.
a. Indicate whether goods Y and Z are substitutes or complements for good X.
b. Is X an inferior or a normal good?
c. How many units of good X will be purchased when Px = $5,230?
d. Determine the demand function and inverse demand function for good X. Graph the
demand curve for good X.

Q3. (present by Group 3)


As a result of an outbreak of a disease caused by a certain virus X, the price of the
vaccine that can prevent infection of X jumps sharply. The public is outraged about this
and the government moves to curb the price hike by imposing a ceiling to the price of the
vaccine.
a. How will resource allocation be different between a situation when there is price
control and a situation when there is no price control?
b. Based on this analysis, explain the TWO functions of price.

Q4. (present by Group 4)


In a competitive market, the market demand is Qd = 400 - 5P and the market supply is Qs
= 10P - 80.
a. What is the full economic price under a price ceiling of $25?
b. What is the total amount of subsidy that the government need to pay if there is a price
floor of $50?

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