Business Economics and Financial Accounting
Demand and Supply
Homework Question
1. Question 01
25−0
a) Slope = 0−100 = −0.25
b) Intercept = 25, Slope = -0.25
Price axis (P)= y, Quality axis (𝑄𝑑𝑒𝑚𝑎𝑛𝑑 )= x
y = -0.25 x+ 25
∴ 𝑄𝑑𝑒𝑚𝑎𝑛𝑑 = 100 − 4𝑃
c)
Demand Curve
30
25
Price
20
15
y = -0.25x + 25
10
5
0
0
20
40
60
80
100
120
Quantity
2. Question 02
30−10
a) Slope = 1000−200 = 0.025
b) Slope = 0.025
Intercept = 5
y = 0.025x +5
∴ 𝑄𝑠𝑢𝑝𝑝𝑙𝑦 = −200 + 40𝑃
c)
Supply Curve
35
30
y = 0,025x + 5
Price
25
20
15
10
5
0
0
200
400
600
Quantity
800
1000
1200
3. Question 03
a) Qd = 30-5P
Demand Curve
7
6
Supply
5
4
3
2
1
0
0
5
10
15
20
25
30
35
50
60
70
Quantity
b) Qd = 60-5P
Demand Curve
14
12
Demand
10
8
6
4
2
0
0
10
20
30
40
Quantity
c) Qd = 100-10P
Demand Curve
12
10
Price
8
6
4
2
0
0
20
40
60
80
100
120
Quantity
d) Qd = 70,000-20P
Demand Curve
4000
3500
3000
Price
2500
2000
1500
1000
500
0
0
10000
20000
30000
40000
Quantity
50000
60000
70000
80000
4. Question 04
a) Qs= 50 +5P
Supply curve
4,5
4
3,5
Price
3
2,5
2
1,5
1
0,5
0
0
10
20
30
40
50
60
70
80
Quantity
b) Qs= -50+ 5P
Supply Curve
35
30
Price
25
20
15
10
5
0
0
20
40
60
80
100
120
Quantity
c) Qs= 40 +4P
Supply Curve
25
Price
20
15
10
5
0
0
20
40
60
Quantity
80
100
120
140
d) Qs= 100P
Supply Curve
25
20
Price
15
10
5
0
0
500
1000
1500
2000
2500
Quantity
e) Qs= -10 + 20P
Supply Curve
25
Price
20
15
10
5
0
0
50
100
150
200
250
Quantity
300
350
400
450
5. Question 05
a) When considering Law of Demand, the demand for a certain product is increasing when its price is
decreasing. For that to happen, all other factors should be constant.
In this problem, the slope of price Vs quantity is downward with a value of (-) 0.5. This downward
slope indicates the inverse relation.
b) When considering the law of supply, when a price of a product is increasing, the quantity supply is
also increasing. For that to happen, all other factors should be constant. Here, slope of price Vs
Quantity supplied shows upward sloping with a value of 0.5. This indicates a positive relation.
c) Considering Equilibrium,
Price = Rs. 5.00
Quantity = 26000
The quantity demanded and Quantity supplied values are identical at the equilibrium point. There
will be no shortages. Therefore, the market will be stable.
d) At new equilibrium,
Price = Rs. 6.50
Quantity = 29000
Demand curve has shifted to the right-side results in the equilibrium price and quantity both to be
increased due to the demand increasing in the market.
e) Expectations of future prices
Changes in income
f) Government taxes
Cost of raw materials
6. Question 07
a) Demand for capsicum will increase. Because there are health benefits people tend to buy more
products. There will be capsicum shortage in the market in the beginning as the supply will be not
enough to cover up the demand. High demand will increase the price of capsicum. Farmers will
produce more. The demand curve will shift to the right. This results in increasing of equilibrium
price and the quantity.
b) As both are beverages, tea can be used as a substitute for coffee. When the tea price decreases,
people will move towards buying tea which reduce the demand for coffee. Demand curve will move
to the left and results in decreasing both equilibrium price and quantity.
c) The income level of the people will increase as the minimum wage increased by $1.50 per hour.
Then people will be able to afford high level of living which also allow them to travel such as taxis
or use their own vehicle instead of bus travelling. The demand for bus travelling will be decreased.
The demand curve will move to the left and will reduce the equilibrium price and quantity.
d) The competition in the financial sector in Australia will increase as a result of entering of new
bankers. The supply curve will move to the left. Therefore, reduction of equilibrium price and
quantity will occur.