PRINCIPLES OF MICROECONOMICS (HSS 1021)

ASSIGNMENT IV
BRANCH: - BT/CSE/CSIT/CE/ME (1ST SEM B.TECH. & DD JULY-2015)

DATE OF ASSIGNMENT GIVEN: - 17/October/2015

LAST DATE OF ASSIGNMENT SUBMISSION: - 29/October/2015
1

The supply and demand function for labour in the local labor market is given below
QdL= 1250 25W and QsL= -550 + 25W, Where QLd= Quantity demanded of
labour, QLS= Quantity supplied of labour, and W = Wage rate
a) Plot the demand and supply function in a graph and determine the equilibrium
wage rate and quantity demanded and supplied for labor in local labor market.
b) Compute consumer surplus, producer surplus and total surplus corresponding to
equilibrium wage rate.
c) Analyse the market situation, if actual wage rate is below equilibrium wage rate,
i.e., Rs 30, by drawing a well-labelled demand and supply diagram of the situation.
d) If the Government fixes the minimum wages at Rs. 38, what happens in the local
labour market? Compute consumer surplus, producer surplus and total surplus
corresponding to minimum wage rate.
e) Analyse the welfare effects of minimum wage policy implemented by government
and comment whether economic welfare will increase or fall by comparing
equilibrium wage rate with minimum wage rate. Use the concept of consumer
surplus, producer surplus and total surplus for your analysis.

Imagine that India is a small country for producing mobile handsets. The domestic
demand and supply function for mobile handsets is given:
QD = 3000 2P and QS = -1000 + 2P
a) By using above demand and supply function, prepare a demand and supply
schedule in given price 800, 900, 1000, 1100 & 1200 and through schedule
determine the equilibrium price and quantity.
Plot the demand and supply function in a graph and determine the domestic price
b) and equilibrium quantity. Analyse the market situation if actual price of the
mobile hand set is Rs.900 &Rs. 1100
c) If free trade is restricted then corresponding to domestic price and quantity,
analyse economic welfare of India by using the concept of consumer surplus,
producer surplus and total surplus.
d) If there is free trade and the world price for mobile hand set is Rs.800/-, then
suggest whether India will import or export mobile handsets and how many units.
e) Analyse the welfare effects of free trade by using the concept of consumer surplus,
producer surplus and total surplus.

The following information is given relating to market demand and supply

equations for coffee in Ranchi market.
QD = 100 5p and QS = - 50 + 10P
a) Plot the demand and supply function in a graph and determine the market clearing
price and equilibrium quantity for coffee in Ranchi market.
Analyse the market situation, if actual price of coffee is Rs 09/- and Rs 11/b) Compute consumer surplus, producer surplus and total surplus before tax.
c) Government now decided to impose a tax amounted Rs. 12/- on seller for selling a
cup of coffee. Analyse welfare effects of tax by using the concept of consumer
surplus, producer surplus, government revenue and total surplus.
d) In order to increase tax revenue government decided to increase the tax size per
cup of coffee from Rs 12/- to Rs 13.50/-. Analyse the situation and suggest
whether the government policy of increasing the tax size is justified or not.

Imagine, India is a small country producing and consuming Black Chocolate

domestically. The domestic demand and supply equations for Black Chocolate
given:QD = 200 10P and QS = 10P
a) Draw a well-labelled graph of the situation and determine domestic equilibrium
price and equilibrium quantity.
b) Corresponding to domestic equilibrium price determine consumer surplus,
producer surplus and total surplus.
c) If world price is Rs 05, then will India import or export Black Chocolate and how
many units? Also corresponding to world price compute consumer surplus,
producer surplus and total surplus.
d) Now, Govt of India is placing Rs 01 tariff on each unit of black chocolate imported.
Analyse the welfare effects of tariff by using the concept of consumer surplus,
producer surplus, government revenue and total surplus

The following information is given relating to market demand and supply

equations for ice-cream in Delhi market.
QD = 50 5p and QS = - 10 + 5P
a) By using above demand and supply function, prepare a demand and supply
schedule in given prices 4, 5, 6, 7 & 8 and determine the equilibrium price and
quantity utilising the demand and supply schedule.
b) Plot the demand and supply function in a graph and show the market clearing
price and equilibrium quantity for ice-cream in Delhi market.
Analyse the market situation, if actual price of ice-cream is Rs 05/- and Rs 07/c) Compute consumer surplus, producer surplus and total surplus at market clearing
price.
d) In order to increase revenue, Government decided to impose a tax amounted Rs.
02/- per unit of ice-cream on seller. How much buyer will pay and how much seller
will receive per unit of ice-cream after imposition of tax?
e) Analyse the welfare effects of tax by using the concept of consumer surplus,
producer surplus, government revenue and total surplus.

6.The following information is given for producing and selling ice cream cones.
L
Q
Formula
0
0
1
8
2
20
3
36
4
48
5
56
6
60
7
60

AP

MP

TFC AFC TVC AVC

TC

ATC

MC

TR PROFIT

Where, L = Labor, K = Capital, Q = Output, Q = f (L, K), L is variable & K is fixed factor input
In this ice cream producing company the only fixed cost is the machine cost, which is
Rs.100.00
The wage rate per labor engaged is Rs 5.00.
The selling price per unit of ice cream cone in the market is Rs 10.00
a) Prepare the above table and level the graph for each cost elements individually
b) Show the relationship between AP & MP with the help of suitable diagram
c) Show the relationship between AVC & MC with the help of suitable diagrams
d) Show how AP, MP & AVC, MC curves are mirror image to each other with suitable
diagram. Also discuss the relationship between production and cost of production.

N.B.:1. Assignment must content Branch, Section, Regd. No. & Name on the top of the
first page.
2. Assignment must be hand written.
3. Assignment preferably be written on both side of A4 size (Xerox) paper.
4. No assignment will be entertained after 02.30pm of 29/October/2015
5. The branch and section for which 29

th

October 2015 is day off, they have

to ensure that assignment should reach on or before the scheduled date
and time. No extension of time and date will be entertained.

6. Submit the assignment in the class or in the faculty room on or before due date.
E-437: ME(E/F) , CE (A/B/C), BT (C)
E-439: CSE (A/B/C/D), CSIT (D)
E-443: CSE (E/F), CSIT (A/B/C)
E-445: ME(A/B/C/D)
Dont drop your assignment in the faculty room, if door is
locked/closed.
In emergency you can submit the assignment in any one of the
above mentioned room.

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