ECO401 Assignment 1 Complete Solution 2017
ECO401 Assignment No 01 Solution Fall 2017
ASSIGNMENT: The Case: Tomato is second most popular vegetable after potato with 124.75 million tons of production. It is a necessary part of diet because it is useful in raw form as well as in cooked form. Tomato is a main source of vitamin A, B and C with 20% share in daily usage, and it also provides other nutritional elements like potassium, calcium, fiber and iron. Presence of Lycopene made it useful against cancer. In Pakistan, monthly per capita tomato consumption was 0.39 kg and 0.42 kg for rural and urban people, respectively. In recent month, the price of tomato showed a spike due to several reasons such as reduction in import from India and less production in Pakistan.
Suppose the demand and initial supply equations of tomato are given as follows:
Qs = 34 + 0.25P
Qd =88 – 0.05P
Due to the above mentioned supply shock (reduction in import from India and less production in Pakistan), the supply equation changed as follows:
Qs = 22 +0.25P
a) Find the equilibrium quantity and equilibrium price of tomato before supply change.
b) Find the equilibrium quantity and equilibrium price of tomato after supply change.
c) If the price announced by market committee is P = Rs. 140 per kg then how much amount of shortage or surplus would occur after the supply shock? Marks: (4+4+2)