ECO402 Assignment 1 Solution and Discussion


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    Re: ECO402 Assignment 1 Solution and Discussion

    SEMESTER SPRING 2020
    MICROECONOMICS (ECO402)
    ASSIGNMENT
    DUE DATE: JUNE 01, 2020 MARKS: 10
    Case#01:
    Pakistan electricity sector is a developing market. For years, the matter of
    balancing the country’s supply against the demand for electricity had remained
    an unresolved matter. According to Pakistan Economic Survey 2018-19, the
    installed electricity generation capacity reached 34,282 megawatts (MW) in Jul-
    Mar 2018-19 compared to 33,433 megawatts (MW) in the corresponding period of
    previous year, recording a 2.5% growth. Despite the fact that Pakistan’s installed
    capacity to generate electricity has surged up, this sector is still facing manifold
    issues. Let’s suppose the quantity demanded and quantity supplied at different
    prices per unit of electricity are given in the following table:
    Per unit Price (Rupees) Quantity Demanded
    (Thousand MV)
    Quantity Supplied
    (Thousand MV)
    20 25 14
    24 22 16
    26 18 18
    28 16 20
    Requirements:
    Keeping in mind the above table, you are required to:
    A. Identify the per unit equilibrium price of electricity.
    B. Calculate the price elasticity of demand and price elasticity of supply when
    per unit price of electricity is rupees 24.
    Marks: (1+6)
    Case#02:
    Meat is a consumable food that appears in various forms in Pakistanlivestock
    markets including beef, mutton and poultry. Pakistan livestock sector has 50%
    share in agricultural GDP. Meat and poultry are great sources of protein. They
    also provide lots of other nutrients like iodine, iron, zinc, vitamins (especially
    B12), and essential fatty acids. The high cost of a nutritious diet can worsen
    nutrition outcomes, especially for low-income households. Consumer Price Index
    (CPI) is used to assess the situation of Inflation. The monthly price review shows

    the prices of 53 items, including beef, mutton and chicken in 17 major cities of
    Pakistan. The information about nominal prices and CPI of beef, mutton and
    chicken for the year 2019 and year 2020 is given below:
    Item Unit Year Nominal Price in
    Faisalabad CPI Real
    Price
    Beef Kg
    April-
    2019
    375.00 336.48
    April-
    2020 450.00 372.48 ?
    Mutton Kg
    April-
    2019
    950.00 350.53
    April-
    2020 1000.00 380.63 ?
    Chicken,live Kg
    April-
    2019
    179.88 225.63
    April-
    2020 128.00 168.32 ?
    Requirements:
    Keeping in mind the above case and assuming April-2019 as the base year, find
    the real price of beef, mutton and chicken for April-2020.
    Marks: (1+1+1)
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    Note related to load shedding: Please be proactive
    Dear students!
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