• Requirement No.1
    Calculate the market equilibrium level of price and quantity for a housing
    unit.
    Qd = 25000- 2P
    Qs = 10000 + 1P
    SOLUTION:
    As we know that:
    Qs= Qd
    10000+1P= 25000- 2P
    1P+ 2P= 25000-10000
    3P= 15000
    P= 15000/3
    P= 5000
    Putting the value of P
    Qd= 25000- 2(5000)
    Qd= 25000-10000
    Qd= 15000
    Qs= 10000+1P
    Qs= 10000+1(5000)
    Qs= 15000
    Hence equilibrium of P= 5000 is Qs= Qd =15000
    Requirement No.2:
    Calculate price elasticity of demand using point elasticity method when
    the construction industry is in equilibrium and interpret the result.
    Point elasticity= dQd/dp*P/Q
    Qd=25000- 2P
    dQd/dP= 0-2(1)
    dQd/dP=-2
    Point of elasticity=-2 *5000/15000
    =(-2)/3
    Point of elasticity=-0.6666……

    Requirement No.3:
    What kind of price rationing strategy should be implemented by
    government to provide renters with houses at affordable price? Also mention the impact of this
    strategy on equilibrium quantity demanded and equilibrium quantity supplied of houses
    SOLUTION
    For the given case we have followed the” Price floor Stretegy”Because this is a supporting strategy:
    Effect on supply
    Effect on equilibrium price Effect on equilibrium Quantity demand
    Increase supply Decrease price Increase demand

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