Individual data

Variant	I	Px	Py	∆I	∆Px
1	10	1	2	2	1
2	20	1	2	-4	2
3	10	2	1	-2	-1
4	20	2	1	4	3
5	16	1	4	-4	3
6	16	4	1	4	1
7	32	2	4	-8	6
8	32	4	2	-16	4
9	18	1	3	-3	2
10	18	3	1	-6	3
11	36	2	3	-6	4
12	36	3	2	6	3
13	12	2	3	-6	-1
14	12	3	2	6	-1
15	24	2	3	-6	1
16	24	3	2	6	-1
17	20	4	2	4	1
18	20	2	4	-4	3
19	30	2	5	-10	4
20	30	5	2	-10	1
21	14	2	7	7	-1
22	14	7	2	7	-5
23	28	7	2	-7	-5
24	28	2	7	-7	5
25	26	2	6,5	-6	2

Topic 5. Demand, Supply and their interaction (6 hours)

1. Demand Function. Individual Demand Function and Market Demand Function

2. Change in Quantity Demanded and Change in Demand. Inferior, Normal and Superior Goods

3. Supply Function. Change in quantity supplied and Change in supply

4. Market Equilibrium. Market Adjustment to Change

5. Cobweb theorem as an illustration of stable and unstable equilibrium

6. Government regulation of a market. Price ceiling and Price floor. Impact of a tax on price and quantity

7. Demand elasticity. Impact of demand elasticity on price and total revenue. Income elasticity of demand (YED) and Cross elasticity of demand (CED). Price elasticity of supply.

Give the definitions for the following terms:

Demand function

Demand quantity

Inferior good

Normal good

Superior (luxury) good

Supply function

Market equilibrium

Surplus

Shortage

Cobweb model

Tax

Price ceiling

Price floor

Elasticity

Answer the following questions:

1. What is the difference between demand and quantity demanded?

2. How to get market demand with the help of individual demands?

3. Is Demand function and Demand law always have the same meaning?

4. What are the exceptions of Demand Law?

5. What are the factors of Supply?

6. What are the non-equilibrium situations on the market?

7. What is the meaning of the cobweb model?

8. What are the direct and indirect methods of Government regulation of a market?

9. What is the definition and the kinds of tax?

10. What is the practical role of elasticity concept?

11. What are the kinds of demand elasticity?

12. What is the relationship between Price demand elasticity and total revenue of the firm?

13. How to define the relationship between goods using the elasticity concept?

14. What are the kinds of goods can be defined using the concept Income demand elasticity?

Solve the following complex task (choose the variant according to the number in the list of the group):

1. Using your variant individual data present the graphs of demand and supply. Then you have to express these line’s equations (the linear functions of demand and supply). Find the equilibrium characteristics. Show and calculate buyer’s and seller’s benefits of exchange.

2. Plot a cobweb model under presented conditions if initial price equal P₀. For this purpose you should fill the gaps in the following schedule:

Period (day)	Current price	Quantity demanded	Quantity supplied	shortage/ surplus	Next period (day) price
I
II
III
IV
V	…	…	…	…	…

Make a conclusion about market equilibrium.

3. Using an individual value of specific tax/dotation you should define the new equilibrium characteristics, plot the graph of this market situation. Also you need to calculate consumer burden/ benefit, producer burden/benefit, society burden/benefits and Tax Revenue/ Dotation expenditures of the government. Depict these values on your graph.

So at the end of your work you’ll have three pictures with calculations and explanations.

Variant №1

Р₀ = 30 t = 15

Р	Qd	Qs
5	300	75
10	250	100
15	200	125
20	150	150
25	100	175

Variant №2

Р₀ = 2,5 t = 0,5

Р	Qd	Qs
1,0	5	0,0
1,5	4	1,5
2,0	3	3,0
2,5	2	4,5
3,0	1	6,0

Variant №3

Р₀ = 3,5 d = 1

Р	Qd	Qs
2,0	4	-1,0
2,5	3	0,5
3,0	2	2,0
3,5	1	3,5
4,0	0	5,0

Variant №4

Р₀ = 5 d = 2

Р	Qd	Qs
2	7	1
3	6	3
4	5	5
5	4	7
6	3	9

Variant №5

Р₀ = 4 d = 1

Р	Qd	Qs
2	10	1
3	9	3
4	8	5
5	7	7
6	6	9

Variant №6

Р₀ = 1,75 d = 1

Р	Qd	Qs
0	40	-6
1	33	10
2	26	26
3	19	42
4	12	58

Variant №7

Р₀ = 1 t = 1

Р	Qd	Qs
1	7	5
2	6	6
3	5	7
4	4	8
5	3	9

Variant №8

Р₀ = 2,5 d = 0,5

Р	Qd	Qs
1	6	4
2	5	5
3	4	6
4	3	7
5	2	8

Variant №9

Р₀ = 6 d = 2

Р	Qd	Qs
4	22	2
6	18	8
8	14	14
10	10	20
12	6	26

Variant №10

Р₀ = 20 t = 4

Р	Qd	Qs
16	60	30
20	55	40
24	50	50
28	45	60
32	40	70

Variant №11

Р₀ = 6 t = 4

Р	Qd	Qs
6	170	110
8	150	120
10	130	130
12	110	140
14	90	150

Variant №12

Р₀ = 1,5 t = 1

Р	Qd	Qs
1,0	9,0	6
1,5	8,5	7
2,0	8,0	8
2,5	7,5	9
3,0	7,0	10

Variant №13

Р₀ = 1 t = 1

Р	Qd	Qs
1,0	12	8
1,5	11	9
2,0	10	10
2,5	9	11
3,0	8	12

Variant №14

Р₀ = 1,5 d = 0,5

Р	Qd	Qs
1,0	29	9
1,5	25	15
2,0	21	21
2,5	17	27
3,0	13	33

Variant №15

Р₀ = 3 d = 2

Р	Qd	Qs
2	13	3
3	11	6
4	9	9
5	7	12
6	5	15

Variant №16

Р₀ = 2 d = 2

Р	Qd	Qs
2	100	70
3	90	75
4	80	80
5	70	85
6	60	90

Variant №17

Р₀ = 1 d = 2

Р	Qd	Qs
2	120	90
3	110	95
4	100	100
5	90	105
6	80	110

Variant №18

Р₀ = 1,5 d = 0,5

Р	Qd	Qs
1,0	13	8,0
1,5	12	9,5
2,0	11	11,0
2,5	10	12,5
3,0	9	14,0

Variant №19

Р₀ = 4 t = 2

Р	Qd	Qs
6	17	11
8	15	12
10	13	13
12	11	14
14	9	15

Variant №20

Р₀ = 7 t = 1

Р	Qd	Qs
2	100	10
3	90	30
4	80	50
5	70	70
6	60	90

Variant №21

Р₀ = 25 t = 10

Р	Qd	Qs
5	300	75
10	250	100
15	200	125
20	150	150
25	100	175

Variant №22

Р₀ = 4,5 t = 1,5

Р	Qd	Qs
1,0	5	0,0
1,5	4	1,5
2,0	3	3,0
2,5	2	4,5
3,0	1	6,0

Variant №23

Р₀ = 2,5 d = 2

Р	Qd	Qs
2,0	4	-1,0
2,5	3	0,5
3,0	2	2,0
3,5	1	3,5
4,0	0	5,0

Variant №24

Р₀ = 6 d = 3

Р	Qd	Qs
2	7	1
3	6	3
4	5	5
5	4	7
6	3	9

Variant №25

Р₀ = 5 d = 2

Р	Qd	Qs
2	10	1
3	9	3
4	8	5
5	7	7
6	6	9

Solve the following complex tasks (choose the variant according to the number in the list of the group):

1. Using your variant individual data from the schedule and the following demand function: Q_Da = 60 - 2P_a +4P_b +0,5I calculate price demand elasticity coefficient, income elasticity of demand and cross-elasticity coefficient. Make a conclusion on every case result. (NB! You should remember about ceteris paribus condition under every calculating: one factor influence can be determined just under all else equal).

Variant	Pa1	Pa2	Pb1	Pb2	I1	I2
1	1	10	2	5	1000	2600
2	2	20	1	4	1300	2650
3	3	9	3	2	1200	2700
4	4	18	4	7	1100	3000
5	5	8	7	14	1050	1000
6	6	16	8	11	2050	1300
7	7	17	6	9	2300	1200
8	8	14	5	9	2500	1100
9	9	6	23	15	2600	1050
10	10	12	27	19	2650	2050
11	11	5	9	13	2700	2300
12	12	10	17	25	3000	2500
13	13	4	13	10	1000	2600
14	14	8	25	20	1300	2650
15	15	3	18	24	1200	1050
16	16	6	14	16	1100	2050
17	17	11	20	23	1050	2300
18	18	13	28	15	2050	2500
19	19	21	19	12	2300	2600
20	20	24	21	13	2500	2650
21	21	25	4	5	2600	1050
22	22	26	6	8	2650	2050
23	23	15	8	3	2700	2300
24	24	17	22	21	3000	2500
25	25	28	8	4	2150	3500

2. The level of personal income (I_n0) in basic period is $1000. The number of consumers (N₀) is 1200 persons. Total demand for the good (Q_D0^total) is 24000 units. Using information about these values in current period (presented in the following schedule by variants) calculate income elasticity coefficient and make a conclusion about good’s characteristics. What changes in individuals’ quantity demanded you can expect if you know that the level of personal income will change by R%?

Variant	In1, $	N1, persons	QD1total, units	R, %
1	1500	1000	25000	-5
2	1400	900	26000	7
3	1300	800	24500	-9
4	1200	700	20000	20
5	1100	600	21000	-10
6	950	500	22000	15
7	900	650	23000	8
8	850	700	23500	-9
9	1900	750	28000	12
10	2000	800	27000	-14
11	2100	850	23500	15
12	2050	900	20000	-5
13	1550	950	21000	24
14	1450	1000	22500	14
15	1350	1050	23000	-16
16	1250	1100	22200	18
17	1150	1150	29000	-19
18	955	1250	28500	21
19	980	1300	27000	-15
20	1850	1340	26500	10
21	1090	1360	26000	9
22	1020	1370	28000	-6
23	1490	1380	27000	4
24	2410	1500	23500	9
25	890	1050	20000	-11