Semester “Fall 2011”
“Economics (ECO401)”
Assignment No.01 Marks: 20
The case:
The market for Panadol was initially in equilibrium. The demand and supply equations for the market of Panadol were:
Qd = 1000 – 200P
Qs = 100 + 400P
After few years, cost of production of Panadol increased due to increase in price of paracetamol (one of the main ingredient used in the production of Panadol). Due to this increase people started using Disprine instead of Panadol. After some time once again rapid increase in the prices of Panadaol was recorded. This time increase in prices was attributed to increasing demand of the tablet due to dengue fever. This trend added to the miseries of dengue patients. To better cope the situation, measures should be taken to decrease the price of Panadol so that dengue affected poor patients could afford it.
Requirements:
A. Find initial equilibrium price and quantity in the market of Panadol.
B. How would the shift of customers to Disprine have affected the market for Panadol? Support your answer with diagram.
C. How would the increase in cost of production have affected the market for Panadol? Illustrate graphically.
D. How can the price of Panadol be controlled? Analyze graphically. (Marks = 5+5+5+5)
Important Note:
�� Calculate to the point where calculation is being required. NO need to write irrelevant material or extra interpretation.
�� Draw diagrams by yourself. Do NOT copy from any source. NO need to write irrelevant material.
�� Graphs are very important in Economics course. This assignment will enhance your skill of drawing graphs. A complete procedure of “How to draw graphs in MS-Word” is uploaded on announcement page of LMS. Get help from that uploaded file to solve your assignment.
�� Corrigendum related to lecture # 3, 6 and 7 have been uploaded on LMS in the announcement section. Read these corrigenda attentively before solving assignment.
