Question 1: Define Market and Market Equilibrium?

a. By using the demand and supply equations given below, prepare schedule and draw demand and supply curves?

b. At what price and output level the market will be in equilibrium?

Qd = 100 - 6P
Qs = 28 + 3P

Where Qd is quantity demanded, Qs is quantity supplied while P is the price of good.

Question 2: Suppose that you have been hired as an Economic Consultant by OPEC and given the following schedule showing the world demand and supply for oil:

Price (P) ($/barrel)
Quantity Demanded (QD)
(millions of barrels/day)
Quantity Supplied (QS)
(millions of barrels/day)
10
60
20
20
50
30
30
40
40
40
30
50
50
20
60

Answer the following questions:

a. At what price, the oil market will be in equilibrium situation?

b. If OPEC produces 50 million of barrels/day, calculate its Total Revenue (TR)?

c. If the price of oil rises from $40 to $50 per barrel, what will be the Total Revenue (TR) from oil sales? Also mention either TR will increase or decrease?

d. When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Demand (Ed)?

e. When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Supply (Es)?

Question 3: Define and explain the Law of Diminishing Marginal Utility (DMU)? By keeping in view the concepts of Marginal Utility (MU) and Total Utility (TU), complete the following table and answer the questions given below the table.

Units Consumed of Good A

Total Utility(TU)          1     2      3     4      5       6       7
Marginal Utility(MU)   20   35    45    50     50     45     35
 
a. What is the Marginal Utility by consuming 3 units of good A?
b. At what level of consumption, Marginal utility will be Zero?
c. At what level of consumption, Total Utility will reaches at Maximum?
d. At what level of consumption, Marginal utility is Negative?

Question 4: Define Consumer Surplus and Producer Surplus? Use neat diagrams to explain Consumer and Producer Surplus?

Question 5: Define the Law of Supply? Keeping in view the Law of Supply, how the following factors will shift the supply curve? (Each answer must be supported by a neat diagram):

a. If number of producers increases in the market;
b. If there is an advancement in electronics technology;
c. If the prices of raw material increases in automotive industry;
d. If there is an expectation of increase in oil prices during next month.