ECO402 Assignment No 1 Solution Autumn 2021-VU-Microeconomics

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Transcript

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.

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