University of Central Punjab

UCP Business School

Group Assignment 1
Program: MBA, Section C
Last date of submission: 28-04-2014
Analysis of Demand, Supply and Elasticity

Solve ALL Questions
Question 1
The following relationship describes monthly demand for a computer support service firm
looking after small businesses in the region,

= 200 -10P

= -100 +10P
Where Q is the number of businesses that use computer support service and P is the monthly fee
charged in dollars.
a. At what average monthly fee demand will equal zero?
b. At what average monthly fee supply will equal zero?
c. Plot Demand and Supply and find the equilibrium both graphically and numerically?
d. Suppose the demand curve changes and new demand is

= 300 -10P, what are the new
equilibrium P and Q.
e. Suppose New suppliers enter the market and the supply becomes

= -60 +10P, what is
the new equilibrium P and Q?
f. Show these changes on separate graphs
Question 2
Beachfront resorts have an inelastic supply, and automobiles have an elastic supply. Suppose that
a rise in population doubles the demand for both products (that is, the quantity demanded at each
price is twice what it was).
a. What happens to the equilibrium price and quantity in each market?
b. Which product experiences a larger change in price?
c. Which product experiences a larger change in quantity?
d. What happens to total consumer spending on each product?
Question 3
(a) A firm should never produce where marginal product is decreasing. Explain your answer.
(b) Explain the relationship between Short Run Average cost and Short Run Marginal Cost using
a diagram.
(c) Differentiate between Perfect competition and Monopoly market structure
Question 4

Which of the following could have brought about the move?
(a) A fall in the price of a substitute for pens.
(b) A fall in the price of a complement to pens.
(c) A fall in the price of a raw material used to produce pens.
(d) A decrease in consumers' incomes (assume that a pen is an inferior good).
(e) A decrease in the rate of an ad valorem tax.
(f) A decrease in consumers' incomes (assume that a pen is a normal good).
(g) An advertising campaign for pens.
Requirement:
The assignment should be typed in Microsoft Word. Handwritten assignments will not be
accepted.
The title page should include the name of all group members, title of the assignment and
selected countries.
All the graphs produced with the help of the Microsoft Excel should be copied into word
with proper formatting and labels.
There is a zero tolerance policy for the plagiarism. If any external help is taken, the
source should be given its full credit. If any case of plagiarism is found, it would be dealt
quite strictly, the assignment will be given 0 marks.
This is a group assignment. You are required to work in the group of 4 or 5. Each group
should submit only one assignment.
The deadline for the submission is 28-04-2014. The hard copy of the assignment is due at the
start of the class or through the Class Representative (Hafiz Ahsan Liaqat). Late submission will
be penalized in the form of marks reduction. In addition to the hard copy, each group will have to
submit the soft copy too. You should mail the soft copy of the assignment before coming to class
on aforesaid assignment submission date on the e-mail address, rehman.khan@ucp.edu.pk.