ECO402 Assignment No 1 Solution Autumn 2021-VU-Microeconomics
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00:00In the name of Allah, the most Gracious, the most Merciful.
00:02Peace be upon you, dear students and viewers.
00:04Welcome to my YouTube channel, Digital Learning Points.
00:06In today's video tutorial, we will solve the subject code of
00:08Microeconomics,
00:10ECO-402.
00:12We will solve its assignment number 1.
00:14Its last date of submission is
00:1620th December.
00:18Its marks are 10.
00:20So, let's
00:22read out our case study.
00:24I will enlarge it in size
00:26so that you can easily see it
00:28and read it.
00:30What is the case?
00:32Sugarcane is an important industrial
00:34and cash crop of Pakistan.
00:36Sugarcane is
00:38an important
00:40and cash crop
00:42of Pakistan.
00:44Pakistan is the world's 5th largest producer
00:46of sugarcane, the 6th
00:48largest producer of cane sugar
00:50and
00:52the 8th largest consumer of
00:54sugarcane. Pakistan is the
00:56world's 5th largest producer
00:58of sugarcane, the 6th
01:00largest producer of cane sugar
01:02and the 8th
01:04largest consumer of sugar.
01:06The sugar industry
01:08is the country's
01:10second-largest agriculture-based industry
01:12after textile.
01:14The sugar industry
01:16is Pakistan's
01:18second-largest
01:20agriculture-based
01:22industry
01:24after textile.
01:26Pakistan's sugar industry
01:28provides direct employment to 1.5 million people
01:30and in-depth employment
01:32to 9 million people.
01:34Pakistan's sugar industry
01:36provides jobs to
01:381.5 million people
01:40and
01:429 million people
01:44on an annual basis.
01:46Sugar prices have witnessed
01:48a great hike recently in Pakistan
01:50compared to the neighboring
01:52countries.
01:54Sugar prices have witnessed
01:56a great hike recently in Pakistan
01:58compared to the neighboring
02:00countries.
02:02Sugar prices have witnessed
02:04a great hike recently in Pakistan
02:06compared to the neighboring
02:08countries.
02:10Retail sugar prices
02:12have been surging
02:14across the country
02:16almost on a daily basis.
02:18Retail sugar prices have been
02:20surging across the country
02:22almost on a daily basis.
02:24Retail sugar prices have been
02:26surging across the country
02:28almost on a daily basis.
02:30The table to know
02:32The table to know
02:34Rocky
02:49and quantity supply is 16.
02:52What will happen at 90 price? It will be 22.
02:55Price is increasing.
02:57Demand is decreasing while supply is increasing.
03:0018. See this.
03:03110. 20 million. 20 million.
03:06130. Order reduced.
03:09Quantity demanded from 24 to 18.
03:12It has gone to 16 to 22.
03:15Media reports say
03:18the cost of sugar has spiked by over 50%
03:21in the last fortnight.
03:24The sweetener is now being sold for up to Rs. 160 a kilo
03:27in most cities.
03:30Media reports say that
03:33sugar prices have increased by 50%
03:36in the last fortnight.
03:39The sweetener is being sold
03:42for Rs. 160 per kilo
03:46Requirements
03:49Using the table given below illustrates
03:52at which price sugar market is in equilibrium.
03:55Also show the equilibrium conditions graphically.
04:10Calculate elasticity of demand of sugar
04:13when price of sugar is Rs. 90
04:16and interpret your result.
04:23What will be the effect on the equilibrium situation
04:26if cost of production of sugar increases?
04:43Let's go to Part 1.
04:46Before that, let me tell you
04:49that I have used Excel to solve this problem.
04:52Let me tell you the rest of the things.
04:55First of all, we have to tell from the table.
04:58As per equilibrium conditions,
05:01the price where quantity demanded
05:04is equal to quantity supplied.
05:07At price 110, quantity demanded
05:10is equal to quantity supplied.
05:13Let me highlight it.
05:32Now we have to present it graphically.
05:35To present it graphically,
05:38I have highlighted the table.
05:41In our tradition,
05:44we measure the quantity produced
05:47on the x-axis
05:50and bring the price on the vertical axis.
05:53But here I have measured
05:56the quantity on the vertical axis
05:59and the price on the x-axis.
06:03This blue line
06:06shows quantity demanded
06:09and the red line
06:12shows quantity supplied.
06:15Let me clear it.
06:26If you see here,
06:29series Qs.110
06:32values 20.
06:35This 20 is the point of intersection.
06:38This is the equilibrium point graphically.
06:41You can see
06:44the quantity demanded
06:47and quantity supplied is 20
06:50and the price is 110.
06:53We have to show it graphically.
06:56We have to determine the elasticity of demand.
06:59You know what is the elasticity of demand.
07:02It is delta Q over delta P
07:05into P over Q.
07:08I have taken values 0.41%.
07:11I have taken values
07:1422-24-2
07:17divided by delta P
07:2090-70-20-2
07:23into P over Q.
07:26P is 90 divided by 20.
07:29I have taken values 0.41%.
07:32I have shown that
07:35there is a negative relationship
07:38between quantity demanded
07:41and goods price P.
07:44If we bring 1 unit change
07:47in the price,
07:501% will be reduced in demand.
07:53This is its interpretation.
07:56Let's go to the third part.
07:59If the cost of production
08:02increases,
08:05what will be the effect of equilibrium on quantity?
08:08As a result of increase in cost of production,
08:11equilibrium price will increase
08:14and supply will decrease.
08:17Equilibrium quantity demanded
08:20will also decrease.
08:23Curve will shift to leftward.
08:26Leftward will go upward.
08:29As you go upward,
08:32it will go here.
08:35Sorry, I am making a mistake here.
08:38You can draw this graph
08:41according to the traditional way.
08:45I will try to draw it here.
08:58I will keep it here.
09:04It will take a lot of time.
09:07Please understand this curve.
09:11Curve will shift to leftward.
09:14When you take the price
09:17to the vertical axis,
09:20quantity demanded will move
09:23to this direction.
09:26Quantity demanded will decrease.
09:29Equilibrium quantity will decrease.
09:32This will be the equilibrium point.
09:35This is its effect.
09:39I hope you understood this assignment.
09:42If you have any question or query,
09:45you can ask in the comment section.
09:48If you want to share your idea,
09:51please drop your thoughts in the comment section.
09:54Thanks for watching.