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28SepTutorial

Young entrepreneurs in Gwanda have successfully started poultry projects, dominating the local market. The document includes demand and supply equations for chickens, requiring calculations for market equilibrium, consumer and producer surplus, and the impact of a government subsidy. Additionally, it discusses price elasticity of demand for crates of eggs and its implications for suppliers.

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15 views

28SepTutorial

Young entrepreneurs in Gwanda have successfully started poultry projects, dominating the local market. The document includes demand and supply equations for chickens, requiring calculations for market equilibrium, consumer and producer surplus, and the impact of a government subsidy. Additionally, it discusses price elasticity of demand for crates of eggs and its implications for suppliers.

Uploaded by

Lethumusa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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QUESTION ONE

The young entrepreneurs from Gwanda area decided to start poultry projects in an attempt to fight for their financial
freedom. Their projects have grown so well to a point that they now dominate the wanda market and they are mainly
competing as youths. The following table shows the monthly demand and supply of chickens given the range of
prices in Gwanda market.
Price. QTY demanded. QTY supplied
5. 21875. 1500
- 15625. -
- - 29750.
11. - -
a) Given that Gwanda Chickens market demand and
supply equations are Qd = 37500 - 3125P
and Qs = -33812.5 + 7062,5P,
(i) Copy the table above and filling in the missing data.
6 marks)

(ii) Use the above equations to calculate the market


equilibrium
price
and
quantity
[4 marks]

(iii) Demonstrate your findings on (i) on a clearly labelled diagram 2 mark]

(iv) Calculate Consumer surplus and producer surplus.


[6 marks]

(v) Suppose the government decide to support the Young farmers and introduce a subsidy of USD$1 for every
chicken supplied, with aid of the diagram, calculations and comments show the impact of the subsidy on Bubi
chickens market. [12 marks]

Question TWO

Price $ QTY demanded (crate) QTY supplied (Crate


3. 80. 50
3.50. 60. 60
4. 45. 75

i) Using midpoint method calculate PED when price increase from $3 to $3.50 per crate and give a comment.
[4 marks]
elastic
ii) Using your answers (i) how can the suppliers of eggs
use this PED information
[2 marks]
o The demand is elastic, supplier may wish to lower the price and capture many new customers.
o and will not increase the price because the buyers are so sensitive to price.
iii) Using diagrams demonstrate the impact of increase in price on revenue gain and revenue loss when (0)
demand is elastic (il) Demand is Inelastic(4 marks)

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