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ECO401 Assignment 1 Solution and Discussion
MARKS: 10 ASSIGNMENT: COVID-19 pandemic has been spreading all over the world and affecting millions of people. Health experts are laying emphasis on the importance of frequent hand hygiene along with other precautionary measures to prevent the transmission of COVID-19. Frequent hand washing and hand sanitization are the most effective and easy ways to prevent the spread of this disease. Due to COVID-19 the demand for hand wash and hand sanitizers has been increasing rapidly in all over the world. Dettol, safe guard, lifeboy, hiclean, skincare, hemani, silk etc. are different brands of hand wash and hand sanitizers in Pakistan. Dettol is considered as a most trusted brand providing hygiene products that helps to prevent the spread of COVID-19. Suppose demand and supply function of Dettol hand sanitizers are:
Qd = 4500-7P
Where ‘P’ is the price in rupees per bottle of hand sanitizer and ‘Qd’ is quantity demanded of hand sanitizer in number of bottles. ‘Qs’ is quantity supplied of hand sanitizer in number of bottles. Requirements: a) Calculate the market equilibrium level of price and quantity of Dettol hand sanitizer. b) Calculate price elasticity of demand using point elasticity method when the company is in equilibrium and interpret the result.
c) What will happen to supply, equilibrium price and equilibrium quantity of hand sanitizer if government gives subsidy to the manufacturer of Dettol hand sanitizer? (Graph is not required) (Marks: 3+4+3) IMPORTANT NOTE: 24 hours extra / grace period after the due date usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience. OTHER IMPORTANT INSTRUCTIONS: DEADLINE: Make sure to upload the solution file before the due date on VULMS. Any submission made via email after the due date will not be accepted. FORMATTING GUIDELINES: Use the font style “Times New Roman” or “Arial” and font size “12”. It is advised to compose your document in MS-Word format. You may also compose your assignment in Open Office format. Use black and blue font colors only. RULES FOR MARKING Please note that your assignment will not be marked if, It is submitted after the due date. The file you uploaded does not open or is corrupt. It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc. It is cheated or copied from other students, internet, books, journals etc.
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